Income Tax Treaty Policy in the 21st Century: Residence vs. Source

Wells, Bret; Lowell, Cym H.

The United States has repeatedly attempted to stop tax base erosion for almost the entire post-World War I era, and yet the same problems exist today. The need for fundamental tax reform is front-page material in the major newspapers with the US transfer pricing rules and US multinationals portrayed as public enemy #1. The OECD this month issued a report entitled "Addressing Base Erosion and Profit Shifting," and in a competing fashion several important developing countries have initiated their own pact to develop cooperative strategies on these issues outside of the framework of the OECD and UN.

The attached manuscript studies the historical record and sets forth a competing model for dealing with these matters which pre-dated the existing model treaties and transfer pricing paradigm. This earlier paradigm was offered by the International Chamber of Commerce’s but was prematurely abandoned by the League of Nations in favor of the existing paradigm. In light of the fact that the existing paradigm has failed so miserably, the earlier proposal should be re-considered.


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Columbia Journal of Tax Law

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September 29, 2015