The Multilateral Tax Instrument and Its Relationship with Tax Treaties
- N. Bravo
- World Tax Journal, 2016 (Volume 8), No 3
- 13 September 2016
The multilateral instrument to modify bilateral tax treaties is one of the most important and innovative initiatives of the last decades in international tax law. The article aims to contribute to the understanding of the relationship between existing tax treaties and the multilateral instrument once it enters into force. After an in-depth assessment of precedents and literature in public international law and international tax law, the author concludes that, since the provisions of the multilateral instrument and the provisions of tax treaties will coexist, conflicts of treaties may arise. To ex ante resolve these conflicts, the multilateral instrument can provide for compatibility clauses. In their absence, according to the Vienna Convention on the Law of Treaties, the lex posterior principle will apply. The convenience of adding compatibility clauses to the multilateral instrument or using the lex posterior principle depends on the object and purpose that the ad hoc Group currently negotiating the multilateral instrument will assign to it. If compatibility clauses are implemented, it can be anticipated that part of the success of the instrument will lie in the good design of these clauses. Therefore, the article also provides suggestions about the ideal design of the compatibility clauses, taking into account that tax treaties often use different terminology and have different enumeration styles, different wording, and even different scopes.