TAX TREATIES AND ARBITRATION: Settling Disputes among Friends

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TAX TREATIES AND ARBITRATION: Settling Disputes Among Friends Arbitration under Tax Treaties: Improving Legal Protection in International Tax liaAv By Mario Zuger. Amsterdam, The Netherlands: IBFD Publications (, English version published in 2003. Hardcover. 276 pages. $135. (To order a copy in the U.S., call 1-800-367-6234.)

Most countries enter into tax treaties-agreements to abstain from taxation in certain situations-to encourage economic relations with other countries. Treaties are meant to promote friendships. Even chums, however, could have disagreements. When that happens, arbitration can be helpful, according to author Mario Zuger.

This book, which grew out of the author's doctoral dissertation at the University of Vienna, describes how tax treaties are created and how arbitration is used under these agreements. Although a tax treaty is international, its enforcement is national. The author notes that "[i]mplementation will depend on each country's own rules governing the relationship between international law and municipal law." He says, "Ultimately, it is always up to the national administrative and judicial authorities involved to implement the contractual obligations arising from tax treaties, either by directly enforcing the treaty or by enforcing the respective national implementing legislation."

The peculiar nature of a tax treaty can sometimes lead to disputes. First, Zuger says, countries don't interpret international tax treaties the same way. "The lack of uniformity in the application of a treaty may easily cause unintentional double taxation or double non-taxation," he writes.

Second, only a handful of treaties were formed with built-in measures that allow for compliance monitoring by international bodies. …