The UN Model Tax Convention Article 6: The Selective Territoriality: The Specter of Privileged Player in a Rigged Game
The UN Model Tax Convention Article 6: The Selective Territoriality
The Specter of Privileged Player in a Rigged Game
Muhammad Ashfaq Ahmed
 
ABSTRACT: The paper lays out the chessboard on which taxes on international incomes from immovables are contested, bargained, and harvested as per pre-determined rules that are starkly tilted in favor of developed countries. This embedded and pronounced bias in the international tax regime in favor of developed countries makes them a privileged player. The developed countries then also make maneuvers to optimize on their economic gains at the expense of developing nations rendering it a rigged game setting. The paper derives its rationale from an exceptionally selective choice of territoriality on incomes from immovables, which was astonishingly not aligned with the expected reverse capital movement, that is, from developing to developed countries. The genesis and evolution of selective territoriality are traced through its various institutional development phases – League of Nations, Organization of European Economic Cooperation, Organization for Economic Cooperation and Development, and United Nations (UN). An overwhelming international consensus on selective territoriality on incomes from immovables notwithstanding, the UN’s role is brought into spotlight to argue that the developing countries may have suffered massively over the past one hundred years by instinctively believing in UN Model Tax Convention’s efficacy and blindly pursuing Article 6 in their bilateral double taxation conventions. The implications of herd-mentality on part of developing countries got galvanized in the wake of developed countries employing innovative optimization tools – citizenship/residence by investment programs, tax havenry, manipulable ownership structures, beneficial ownership legislations, and porous exchange of information regime – to maximize on the economic gains. The paper undertakes both normative and structuralist evaluation of selective territoriality to sum up that this is an unjust principle of distribution of fiscal rights particularly in asymmetric inter-state economic relationships, and can hold its ground only until developing countries attain full cognition of the reality and start raising their vocal chords in unison to dismantle it.

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