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Can the OECD Model Tax Convention, which is 50 years old this year, continue to fulfill its role of helping to make international taxation fairer and more manageable? Probably yes, though there are challenges.
Half a century ago, the Fiscal Committee of the Organisation for European Economic Co-operation (OEEC), which later became the OECD, published a first draft installment of how a model treaty on international taxation might look. The global economy was starting to become more integrated in the 1950s and the intention was to assist businesses and governments by helping to avoid double taxation and to prevent tax evasion. The question to resolve was straightforward enough: how might governments claim their rightful taxation from growing international businesses, while not leaving corporations worried about being unfairly taxed across the different jurisdictions in which they operate?
The OECD Model Tax Convention was bom. It was an interesting baby. The so-called London and Mexico models of the League of Nations are clearly in the family tree, but the direct parents were those senior tax officials from European countries who, in 1956, began a collective project aimed at the development of uniform tax treaty provisions under the umbrella of the OEEC. Like all parents, they did not know what their baby would grow up to be.
Back in those days the pace of life was more sedate. Delegates would come to Paris a few times a year for week-long drafting sessions. By mid-week exhaustion would set in, so each Wednesday a trip to the countryside was arranged. Refreshed, the delegates would then return to their labours.
By 1963 a full draft was ready though it was not until 1977 that the model Double Taxation Convention was published. The 1963 draft was essentially the consolidation of four earlier drafts, the first one of which was published in 1958. This is why we consider that the birth of the OECD model was 1 July 1958.
At the outset, there were fewer than 15 countries involved in drafting the first text; by 1963 the OECD had expanded to 20 countries. It was primarily OECD member countries that contributed to the model, but since 1996 we have opened up the process to non-OECD countries and to...