A VAT/GST Model Convention

Based on an in-depth analysis of the basic principles underlying VATs/GSTs, this book examines the phenomenon of VAT/GST double taxation and the possible remedies.

Winner of the 2012 Maurice Lauré Prize awarded by the International Fiscal Association (IFA).

Why this book?

Given the increasing problem of double taxation concerning value added tax (VAT)/goods and services tax (GST) and the resulting constraints to international trade, it is time for the international community to take action. This book analyses the phenomenon of VAT/GST double taxation and possible remedies. VAT/GST treaties would be one of them.

But how should one design a VAT/GST treaty? To what extent do existing income tax treaties already apply to VAT/GST? Can income tax treaties simply be extended to VAT/GST or is there a need for a separate, independent VAT/GST treaty? Can the concepts, functioning, and structure of income tax treaties be used for VAT/GST purposes? What are possible alternatives? What should the scope of a VAT/GST treaty be? How can taxing rights be allocated between the parties to a treaty?

These questions are answered in this book, based on an in-depth analysis of the basic principles underlying VATs/GSTs; this analysis also provides the theoretical basis for policy decisions, especially on the allocation of VAT/GST taxing rights between contracting states. From the principles of the taxes, this book extracts criteria that a distributive rule should fulfil, all of which permits a structured assessment and evaluation of different options for distributive rules and their underlying place of taxation choice. Other topics that require consideration and that are discussed for purposes of a VAT/GST treaty are, for instance, the treatment of internal dealings, associated businesses, intermediaries, undisclosed agents and the consideration of input-taxed supplies (i.e. supplies that are exempt without a right for deduction of input VAT/GST).

This book strongly encourages international dialogue and effort in the coordination of national VAT/GST laws. If, however, coordination of unilateral measures fails to effectively prevent double taxation, states can take recourse to binding instruments into which they can build dispute resolution mechanisms – just as they do with respect to income taxes. This book provides a toolkit that may assist in the design of such an instrument and provides an example: a multilateral VAT/GST Model Convention.