Fearful symmetry : the attribution of profits "in each Contracting State"

Under Art. 7(1) of the OECD Model Tax Convention, a country is authorized to tax a resident of the other country carrying on business in the first country through a permanent establishment (PE) only to the extent of the profits attributable to the PE. Art. 7(2) provides the key principle for determining the profits attributable to a PE, namely, the profits it might be expected to make if it were a separate and distinct enterprise dealing wholly independently with the enterprise of which it is a part. Art. 7(2) also states that the profits so determined must be attributed to the PE "in each Contracting State". This seemingly simple phrase has always appeared to be curious and out of place. This article examines the meaning of "in each Contracting State" and explores the extent to which the OECD Model requires the symmetrical application of the business profits attributable to a PE.