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Non-Discrimination in Tax Treaties: Selected Issues from a Global Perspective - Review

Reviewed by Glen Loutzenhiser, British Tax Review B.T.R. 4 (2017), pp. 491-493


Non-Discrimination in Tax Treaties: Selected Issues from a Global PerspectiveThis book,1 Volume 14 in IBFD’s excellent EC and International Tax Law series, is a collection of nine works analysing the concept of non-discrimination. In fact the title slightly undersells the book as the material covered extends well beyond tax treaties into discrimination under other international investment agreements (IIAs), World Trade Organization law, non-treaty direct tax cases of the European Court of Justice (ECJ) and the European Convention on Human Rights (ECHR). The editors colourfully describe the book’s central focus as an “evergreen” concept, with a relatively stable core but with changing implications, regional dimensions and topical applications.2 Unusually, the book was written specifically for students of the Advanced LLM on International Tax Law, organised jointly by the University of Amsterdam and IBFD, in the form of research-based teaching supplements.3 Unlike other IBFD collections recently reviewed in this Review,4 the book does not set out to provide a globally comprehensive treatment of its subject, but rather is a selection of pieces on non-discrimination linked in “overt and covert” ways, by common elements and divergences.5
The book begins with a chapter written by Werner Haslehner on, as a reader might expect, nationality non-discrimination and Article 24 of the OECD Model Tax Convention.6 Haslehner begins by citing Mary Bennett’s 2005 David R. Tillinghast Lecture on non-discrimination in international tax law, wherein Bennett observes “the non-discrimination article bears no obvious relationship with the rest of the treaty”.7 Haslehner highlights that Article 24, unlike the core provisions of treaties, does not address the question of which state may exercise taxing rights but rather governs how either state may exercise such rights.8 Haslehner’s chapter sets the stage well for the rest of the book by working through Article 24 at some length, starting with a discussion of the purpose and shortcomings of the Article, highlighting the 2008 updates, and concluding with some comments on the relationship between Article 24 and the EU freedoms.9 He explains quite effectively the difficulty companies have in invoking national non-discrimination and the promise, from a taxpayer’s perspective, in combining various non-discrimination clauses to resolve instances of “complex discrimination”.10 In the following chapter Catalina Hoyos Jiménez analyses roughly the same topic – nationality discrimination – but this time from a Latin American perspective and considering a variety of IIAs including double tax treaties but also foreign trade agreements and bilateral investment treaties.11 She is highly critical of the rule-based approach found in double tax treaties failing to provide the strong, principled anti-discrimination protection found in other types of IIAs.12
Otto Marres’ Chapter 313 is a tightly focused, well-argued piece on non-discrimination and interest deductibility, covering the interrelationship between thin capitalisation provisions, the application of the arm’s length standard in transfer pricing under Article 9, the interest deductibility provisions in Article 24(4), and relevant ECJ cases including Lankhorst-Hohorst.14 In Chapter 4, Bruno da Silva provides a lengthy and detailed assessment of the application of Article 24(5) on capital ownership non-discrimination.15 He highlights the increasing number of cases challenging domestic tax law under the non-discrimination provisions,16 backed up by cases and illustrative examples (with helpful diagrams). Danil Vinnitskiy presents the Russian approach to Article 24(4) and (5) in Chapter 5, drawing in particular on thin capitalisation cases.17 In Chapter 6, Kasper Dziurdz compares and contrasts the WTO aspects of non-discrimination with Article 24.18 He argues that many factual and legal considerations should be invoked at the comparability or less favourable treatment stages (or both) of a tax non-discrimination analysis in determining if different treatment is justified in a particular case, and that this approach is unaffected by the absence of specific “justifications” under Article 24.19

Turning now to the European context, in Chapter 7, Frans Vanistendael, Emeritus Professor, KU Leuven, explores what the EU can learn from the OECD on non-discrimination (and vice versa).20 Vanistendael demonstrates that although the OECD and EU approaches are similar, the different purposes of the OECD Model Convention and the Treaty on the Functioning of the European Union, as well as the different contexts in which the treaties operate, will often lead, rightly, to dissimilar outcomes.21 The piece by Peter Wattel in Chapter 8 continues the EU dimension by highlighting the inconsistency and uncertainty in the ECJ’s comparability analysis in free movement cases involving taxation.22 He argues only one comparability standard makes sense: to be (subject to tax) or not to be (subject to tax).23 Chapter 9 concludes with an analysis of discriminatory taxation and the ECHR by Robert Attard.24 Attard reviews the recent cases of the European Court of Human Rights (ECtHR)25 and concludes that tax discriminatory cases are particularly difficult to pursue because the ECtHR is extremely reluctant to question a Contracting State’s wide margin of appreciation.26

In summary, this book is an excellent resource for those students, academics and practitioners looking for a broader perspective on non-discrimination in tax treaties and beyond.
1 P. Pistone and D. Weber (eds.), Non-Discrimination in Tax Treaties: Selected Issues from a Global Perspective (Amsterdam: IBFD, 2016).
2 Pistone and Weber, above fn. 1, vii.
3 Pistone and Weber, above fn. 1, vii.
4 See, e.g. G. Loutzenhiser, “Book Review: GAARs – A Key Element of Tax Systems in the Post-BEPS World, by Michael Lang, Jeffrey Owens, Pasquale Pistone, Alexander Rust, Josef Schuch and Claus Staringer (eds), (Amsterdam: IBFD, 2016)” [2016] BTR 703.
5 Pistone and Weber, above fn. 1, vii.
6 W. Haslehner, “Nationality Non-Discrimination and Article 24 OECD Model: Perennial Issues, Recent Trends and New Approaches” in Pistone and Weber, above fn. 1, 1.
7 Haslehner, above fn. 6, 1 citing M. Bennett, “The David R. Tillinghast Lecture – Nondiscrimination in International Tax Law: A Concept in Search of a Principle” (2006) 59 Tax L. Rev. 439.
8 Haslehner, above fn. 6, 2.
9 Haslehner, above fn. 6, 1-26.
10 Haslehner, above fn. 6, paras. 1.32-1.33.
11 C. Hoyos Jiménez, “Non-Discrimination on the Basis of Nationality in IIAs: A Latin American Tax Perspective” in Pistone and Weber, above fn. 1, 27-38.
12 Hoyos Jiménez, above fn. 11, para. 2.4.
13 O. Marres, “Interest Deduction Limitations: When to Apply Articles 9 and 24(4) of the OECD Model?” in Pistone and Weber, above fn. 1, 39-70.
14 Lankhorst-Hohorst GmbHv Finanzamt Steinfurt (C-324/00) [2002] ECR I-11779 (ECJ).
15 B. da Silva, “Revisiting the Application of the Capital Ownership Non-Discrimination Provision in Tax Treaties” in Pistone and Weber, above fn. 1, 71-132.
16 da Silva, above fn. 15, 131.
17 D.V. Vinnitskiy, “Non-Discrimination in Tax Treaties – Art. 24(4) and (5) OECD MC: A Russian Approach to Tax Treaty Interpretation” in Pistone and Weber, above fn. 1, 133-166.
18 K. Dziurdz, “Non-Discrimination and Harmful Tax Competition under WTO Law and Article 24 of the OECD Model” in Pistone and Weber, above fn. 1, 167-224.
19 Dziurdz, above fn. 18, 222-223.
20 F. Vanistendael, “Non-Discrimination: Can the EU Learn from the OECD Model Convention and Vice Versa?” in Pistone and Weber, above fn. 1, 225-254.
21 Vanistendael, above fn. 20, 252-254.
22 P. Wattel, “Non-Discrimination a la Cour: The ECJ's (Lack of) Comparability Analysis in Direct Tax Cases” in Pistone and Weber, above fn. 1, 255-282.
23 Wattel, above fn. 1, 281-282.
24 R. Attard, “Discriminatory Taxation and the European Convention on Human Rights” in Pistone and Weber, above fn. 1, 283-299.
25 Attard focuses on cases delivered after the publication of Philip Baker's seminal work, “Taxation and the European Convention on Human Rights” [2000] BTR 211: see Attard, above fn. 24, 283.
26 Attard, above fn. 24, 298-299.