As the world’s economy becomes ever more integrated, international tax disputes have grown in frequency and importance. Yet until recently, little had changed in the mechanism bywhich such disputes are resolved. The efficient functioning of the mutual agreement procedure (MAP) contained in most income tax treaties remains subject to the variable input of contracting states, and in some cases taxpayers still struggle to alleviate double taxation.
One solution to this problem for businesses operating in multiple jurisdictions is tax arbitration, which, due to a variety of policy decisions, international initiatives and judicial precedents is set to become a more dependable means of investor recourse.
In this article we examine these recent changes and explain why they will make the resolution of international tax disputes more timely and principled in the future. We also consider and compare the form of arbitration provided for in the OECD’s recently published Multilateral Instrument (MLI) as against other formats which are currently in use.