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Organisation for Economic Co-operation and Development
OECD Work on Dispute
Resolution
OECD- India IFA Branch
Mumbai
Mary Bennett
24-25
2008Pricing & Financial Transactions
Head January
of Tax Treaty, Transfer
Division
OECD Centre for Tax Policy and Administration
Jacques Sasseville
OECD Tax Treaty Unit
Centre for Tax Policy and Administration
Resolving International Tax Disputes
 Major concern for business and government
 Disputes have increased in number and
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complexity… this trend will continue
Need a more effective procedure to resolve
disputes
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OECD Efforts to Improve Dispute Resolution
Procedures
 Established Joint Working Group (JWG) on
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Dispute Resolution
Significant public consultations, surveys,
research done and drafts published over 4 years
February 2007 -- Final Report published
The key to resolving cross-border tax disputes
between tax administrations is the mutual
agreement procedure: this is the only available
State-to-State procedure
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OECD Results
Arbitration added to MAP – mandatory, binding
arbitration of MAP cases unresolved after 2
years
Changes to the OECD’s Model Tax Convention’s
Article 25 Commentary -- to incorporate
proposals for improved MAP operation
Manual on Effective Mutual Agreement
Procedures (MEMAP) -- to explain MAP and
describe best practices for tax authorities and
taxpayers
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Improving Dispute Resolution Mechanisms
 Next steps:
• Final Report’s recommendations to be incorporated
into 2008 Update to OECD Model Tax Convention
• OECD Member countries have agreed to publish
MAP statistics annually on OECD website
• Arbitration provisions are gradually being
incorporated into bilateral treaties
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MEMAP
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MEMAP (Manual on Effective Mutual Agreement
Procedure)
Included in the conference documentation
Updates on www.oecd.org/ctp/memap
Provides general background on MAP
Sets out non-binding guidelines for “best practices” by
competent authorities and taxpayers
Encourages transparency, timeliness, broad access,
principled approaches
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MEMAP Best Practices
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Best Practice Nº1: Resolving and publishing issues
of interpretation or application
Best Practice Nº2: Robust use of Article 25(3) power
to relieve double taxation
Best Practice Nº3: Principled approach to resolution
of cases
Best Practice Nº4: Transparency and simplicity of
procedures for accessing and using the MAP
Best Practice Nº5: Providing complete, accurate,
and timely information to the competent authorities
Best Practice Nº6: Allowing electronic submissions
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MEMAP Best Practices
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Best Practice Nº7: Allowing early resolution of
cases
Best Practice Nº8: Earlier notification of a potential
case
Best Practice Nº9: Liberal interpretation of time
limits and advising of treaty rights
Best Practice Nº10: Avoiding exclusion from MAP
relief due to late adjustments or late notification
Best Practice Nº11: Consideration of MAP
assistance for cases described as “tax avoidance”
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MEMAP Best Practices
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Best Practice Nº12: Countries eliminate or minimize
“exceptions” to MAP
Best Practice Nº13: Taxpayer presentations to
competent authorities
Best Practice Nº14: Cooperation and transparency
Best Practice Nº15: Face-to-face meetings between
competent authorities
Best Practice Nº16: Bilateral process improvements
Best Practice Nº17: Decision summaries
Best Practice Nº18: Recommendation for MAP
cases beyond two years
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MEMAP Best Practices
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Best Practice Nº19: Avoid blocking MAP access via audit
settlements or unilateral APAs
Best Practice Nº20: Interest relief
Best Practice Nº21: Suspension of collections during MAP
Best Practice Nº22: Readily available access to a competent
authority
Best Practice Nº23: Independence and resources of a
competent authority
Best Practice Nº24: Performance indicators for the competent
authority function and staff
Best Practice Nº25: Implementing and promoting ACAP and
bilateral APA programs
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Arbitration Provision Added to OECD Model
“5. Where,
a) under paragraph 1, a person has presented a case to
the competent authority of a Contracting State on the
basis that the actions of one or both of the Contracting
States have resulted for that person in taxation not in
accordance with the provisions of this Convention, and
b) the competent authorities are unable to reach an
agreement to resolve that case pursuant to paragraph 2
within two years from the presentation of the case to the
competent authority of the other Contracting State,
[…]
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Arbitration Provision Added to OECD Model
any unresolved issues arising from the case shall be
submitted to arbitration if the person so requests. These
unresolved issues shall not, however, be submitted to
arbitration if a decision on these issues has already
been rendered by a court or administrative tribunal of
either State. Unless a person directly affected by the
case does not accept the mutual agreement that
implements the arbitration decision, that decision shall
be binding on both Contracting States and shall be
implemented notwithstanding any time limits in the
domestic laws of these States. The competent
authorities of the Contracting States shall by mutual
agreement settle the mode of application of this
paragraph.
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Main features
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Mandatory, binding arbitration of unresolved issues in
Article 25(1) cases after 2 years of MAP
Arbitration is part of the mutual agreement procedure,
not an alternative recourse
No arbitration of issues on which competent
authorities agree
Relationship with recourse to domestic courts
Implementation of the decision through a mutual
agreement
OECD recognises that not all countries are in a position
to include arbitration in their treaties
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Procedural aspects
 Flexible - mode of application left to mutual
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agreement of Contracting States
Detailed Commentary on the provision
Sample mutual agreement on procedural
aspects
Two main types of procedure
• Normal procedure
• Streamlined procedure
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Improving Dispute Resolution Mechanisms
Other changes to Article 25 Commentary:
 Clarify time limitations for invoking MAP
 Clarify triggers for MAP access
 Clarify (and limit) grounds for denying access
 Encourage suspension of collection during MAP
 Encourage appropriate treatment of interest and
penalties
 Encourage use of MAP to make corresponding
adjustments
 Clarify relationship with domestic law, to encourage full
use of MAP
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