The Mutual Agreement Procedure: Coordinating the Global Tax Orchestra
| Author | Konstantinos Taramountas |
| Position | Trainee Lawyer |
| Pages | 39-62 |
2019 LSE LAW REVIEW 39
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The Mutual Agreement Procedure: Coordinating the
Global Tax Orchestra
Konstantinos Taramountas*
ABSTRACT
The OECD and G20, via the Base-Erosion and Profit Shifting (BEPS) project, have recently
taken measures under Action 14 to improve tax dispute resolution mechanisms by promoting
the timely resolution of treaty-related disputes via the Mutual Agreement Procedure (MAP).
The purpose of this article is to understand how the existing tax dispute resolution mechanism
works in the context of the MAP and to evaluate its suitability, effectiveness and efficiency. In
this context, this article examines whether the emergence of new legal technology could complement
the MAP and supplementary arbitration, and proposes both theoretical and practical solutions
aimed at making the tax dispute resolution mechanism more effective by speeding up resolution,
attracting both developed and developing countries, as well as coordinating competent authorities.
INTRODUCTION
By analogy to an orchestra, the Articles under the OECD Model Tax
Convention (MTC) constitute the instruments which the various treaty partners
are called to use in order to eliminate double taxation and further develop their
economic relations. The Mutual Agreement Procedure (MAP) under Article 25,
however, enjoys a special attribute, as it is, instead, the baton which has provided
a medium for competent authorities to communicate their concerns on the
divergent interpretations and applications of their bilateral treaties, since the
foundation of the international tax regime.1 As a result, it ensures the proper
* LLB (Reading) (First Class) ‘17, LLM in Taxation (LSE) (Distinction) ‘18, Winner of the Pump
Court Tax Chambers Prize in Taxation ‘18. Trainee Lawyer at Elias Neocleous & Co LLC,
Cyprus. The author can be contacted at ktaramountas@gmail.com.
1 League of Nations, Committee of Experts on Double Taxation and Tax Evasion, Double Taxation and Tax
Evasion (Publications of the League of Nations C. 216. M. 85. 1927) -
archive.unog.ch/Dateien/CouncilMSD/C-216-M-85-1927-II_EN.pdf > accessed 15 May 2018, 12;
40 Coordinating the Global Tax Orchestra Vol 4
functioning of the treaties and safeguards that taxpayers are subject to taxation in
accordance with it.2
Its significance was not overlooked by the OECD Base Erosion and
Profit shifting (BEPS) project, endorsed by the G20, at their first attempt to
revamp the international tax regime since its establishment by the League of
Nations.3 Action 14 does not directly assist with countering BEPS but, as the
OECD mentions, is essential to finding ways to improve the effectiveness of the
dispute resolution mechanism, in order to ensure that the transition to the new
international tax acquis is as smooth as possible.4 However, a successful
performance requires the conductor to coordinate the plays of the different
players. Accordingly, this paper argues that mediators play a vital role in this novel
global tax orchestra. They can successfully act as the conductors who will
coordinate the behaviour of treaty partners in order to find a common ground to
enforce new treaty provisions in accordance with their agreement and, therefore,
produce a coherent tax policy ‘melody’.
Having said that, the persistence of rich countries in promoting
mandatory arbitration under Action 14 is at odds with the OECD’s attempt to
make the dispute resolution mechanism more effective.5 If some countries lack
experience in using MAPs and are hostile towards the existence of a third party
adjudicator, then one may legitimately wonder how an arbitration clause can
become a mandatory Alternative Dispute Resolution (ADR) mechanism and
enjoy uniform consensus among countries in its application. Regardless of
whether fiscal sovereignty issues are not well grounded from a theoretical
perspective, from a political point of view, they cannot suddenly disappear.
For example, under Article 13 of the League of Nations MTC 1927 needed to ‘confer together and
take the measures required in accordance with the spirit of this Convention’.
2 JS Wilkie, ‘Article 25: Mutual Agreement Procedure’ in Richard Vann (eds) Global Tax Treaty
Commentaries (Amsterdam IBFD 2017) 48.
3 OECD, Action Plan on Base Erosion and Profit Shifting (OECD Publishing 2013)
<https://www.oecd.org/ctp/BEPSActionPlan.pdf> accessed 15 May 2018.
4 ibid 23.
5 OECD, Making Dispute Resolution Mechanisms More Effective, Action 14 - 2015 Final Report (OECD
Publishing 2015) <http://dx.doi.org/10.1787/9789264241633-en> [hereafter Action 14] accessed
15 May 2018.
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