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Advanced Introduction to International Tax Law, Second Edition

Reuven S. Avi-Yonah

This second edition of the Advanced Introduction to International Tax Law provides an updated and succinct, yet highly informative overview of the key issues surrounding taxation and international law from Reuven Avi-Yonah, a leading authority on international tax. This small but powerful book surveys the nuances of the varying taxation systems, offering expert insight into the scope, reach and nature of international tax regimes, as well as providing an excellent platform for understanding how the principles of jurisdiction apply to tax and the connected tools that are used by countries in imposing taxes.
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The tax treaty network

Reuven S. Avi-Yonah

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There are currently over 3,000 bilateral income tax treaties in force around the world. Remarkably, about 80 percent of the text of any two tax treaties is identical because they all follow the OECD or UN model treaties, which themselves have become more similar to each other. It can therefore be argued that the treaties constitute an international tax regime that also constrains the domestic tax law choices of even the larger countries. No country can easily decide to abandon the ALS for transfer pricing or to tax foreign corporations that do not have a PE without violating all of its tax treaties.

Despite the traditional name for treaties (“Convention for the Avoidance of Double Taxation”) the main purpose of tax treaties is not to prevent double taxation, which is generally prevented by unilateral exemption or credit, but to implement the benefits principle by shifting the tax on passive income from the source to the residence country, while allowing the source country to tax active income if it is attributable to a PE within it. This has led some to question whether developing countries gain from tax treaties since they typically lose revenue (because they are capital importing), but tax treaties are important to reassure both direct and portfolio investors that tax rates will remain bounded. There is empirical evidence that tax treaties increase foreign direct investment (FDI) into developing countries.

In addition, modern tax treaties (from 1981 onward) also put limits on double non-taxation,...

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