― 5[4325] ―


In the reportnote on the work of its tenth session held in London in March 1946, the Fiscal Committee of the League of Nations expressed itself as follows:

“During the last session which the Committee held before the war, in June 1939, it was suggested that a revision should be undertaken of the model bilateral conventions on tax matters which had been prepared in 1928 by the General Meeting of Government Experts on Double Taxation and Fiscal Evasion.note

“These models had proved of the greatest value in facilitating the negotiation of tax treaties, and the Committee stated in 1935 that:

“ ‘The existence of model draft treaties of this kind has proved of real use in such circumstances in helping to solve many of the technical difficulties which arise in such negotiations. This procedure has the dual merit that, on the one hand, in so far as the model constitutes the basis of bilateral agreements, it creates automatically a uniformity of practice and legislation, while, on the other hand, inasmuch as it may be modified in any bilateral agreement reached, it is sufficiently elastic to be adapted to the different conditions obtaining in different countries or pairs of countries.’note

“The numerous tax treaties which were concluded during the decade which preceded the war contained, however, various improvements on the 1928 Model Conventions. The Fiscal Committee, for its part, had been able to carry further the work initiated by the General Meeting of Government Experts. Moreover, new trends and new problems had appeared in the fields of international trade and investment. Consequently, it seemed desirable to prepare new model conventions that would reflect the technical progress achieved since 1928 and codify the views and recommendations that had been expressed by the Fiscal Committee in the course of its various sessions.note

  ― 6[4326] ―

“This work of revision and codification was undertaken by a Sub-Committee which met at The Hague in April 1940, and was continued by two Regional Tax Conferences which were held under the auspices of the Fiscal Committee, in Mexico City in June 1940 and July 1943.

“The Committee has now studied the result of this work.note It wishes to express its agreement with most of the conclusions which were reached by the experts who met in Mexico City in 1943 and is of the opinion that the Model Conventions prepared by those experts represent a definite improvement on the 1928 Model Conventions. Nevertheless, since the membership of the Mexico City and London meetings differed considerably, it is natural that the participants in the London meeting held, on various points, different views from those which inspired the Model Conventions prepared in Mexico. The general structure of the Model Conventions drafted at the present session is similar to that of the Mexico models. A certain number of changes have been made in the wording, and some articles have been suppressed because they contained provisions already implied in other clauses. On other points, new articles have been inserted to make use of certain innovations contained in conventions, such as those between the United Kingdom and the United States, concluded since the 1943 meeting. Virtually, the only clauses where there is an effective divergence between the views of the 1943 Mexico meeting and those of the 1946 London meeting are those relating to the taxation of interest, dividends, royalties, annuities and pensions. The Committee is aware of the fact that the provisions contained in the 1943 Model Conventions may appear more attractive to some States—in Latin America for instance—than those which it has agreed during its present session. The two texts are therefore given on opposite pages in Annex A. The Model Conventions, as they now stand, can afford guidance to negotiators of tax treaties. The Committee thinks that the work done both in Mexico and in London could be usefully reviewed and developed by a balanced group of tax administrators and experts from both capital-importing and capital-exporting countries and from economically-advanced and less-advanced countries, when the League work on international tax problems is taken over by the United Nations. A commentary on the new Model Conventions will be published separately in the near future, in accordance with the procedure followed in connection with the 1943 Mexico Model Conventions.”

The present document is intended to furnish the commentary thus requested by the Fiscal Committee. It has been prepared by the Secretariat and should not be taken as a

  ― 7[4327] ―
statement in all its parts of the views of the Committee. It is merely intended to provide a working instrument in the study of the texts prepared by the Committee. The Model Conventions which are going to be considered and are reproduced in the Annex refer respectively to the following subject-matters:

  • (a) Prevention of the double taxation of income and property;
  • (b) Prevention of the double taxation of estates and successions;
  • (c) Reciprocal administrative assistance for the assessment and collection of taxes on income, property, estates and successions.

The Model Conventions on the Prevention of Double Taxation are also intended to avoid extra-territorial and discriminatory taxation of foreigners.

International double or multiple taxation arises when the taxes of two or more countries overlap in such a manner that persons liable to tax in more than one country bear a higher tax burden than if they were subject to one tax jurisdiction only. The additional burden so incurred must, of course, be due not merely to differences in tax rates for the countries concerned, but to the fact that two or more jurisdictions concurrently impose taxes having the same bases and incidence without regard to the claims of the other tax jurisdictions.