Taxing Cross-Border Services: Current Worldwide Practices and the Need for Change

Taxing Cross-Border Services: Current Worldwide Practices and the Need for Change
This book contains a worldwide survey of double tax treaties with respect to cross-border services and critically analyses current guidance in the Model Tax Conventions.

Why this book?

The tradability of services cross border has increased vastly since the provisions in the OECD and UN Model Tax Conventions were first developed. This book examines the factors used in these Models to connect an enterprise with the tax jurisdiction of a state for the purposes of allocating the tax base arising from cross-border enterprise services. It questions whether these factors produce an allocation of taxing rights which is acceptable to both multinational enterprises and tax authorities, in terms of satisfying any debt of economic allegiance and limiting base erosion. The connecting factors used, such as permanent establishment and location of the customer, are examined from theoretical and empirical standpoints: if they are considered acceptable, they should be found to be in widespread use, both in the domestic laws of states and in the network of bilateral double tax treaties. 

The work commences with a review of the developments in international trade in services since the 1920s. It then moves on to consider the theoretical basis for host state taxation of non-resident service providers. The extent to which the connecting factors adopted in the Models are followed is analysed by means of a review of domestic law in a selection of states and by a comprehensive survey of provisions concerning cross-border services in existing double tax treaties.

The analysis reveals that most treaties do not follow the OECD Model with respect to cross-border enterprise services. Whilst many follow the UN Model in some respects, the provisions adopted lack a sound theoretical basis, and the use of a time threshold for source state taxation is a poor proxy, both for measuring any debt of economic allegiance to the source state and for measuring the degree of base erosion suffered by the source state. These two findings suggest that a fresh approach is needed. A proposal is offered which uses a better proxy for establishing the right of the source state to tax and which strives to produce an equitable division of the tax base. The proposal suggests an administrative mechanism which can be used even by states with poorly developed tax administrations.


Sample excerpt, including table of contents

This book is part of the IBFD Doctoral Series

View other titles in the series


Angharad Miller is an experienced lecturer in international taxation, currently at Bournemouth University. She obtained her PhD at the Institute for Advanced Legal Studies, University of London under the supervision of Dr Philip Baker QC.