Tax Discrimination and Capital Neutrality

Abstract:     
"Tax discrimination" is an increasingly important legal concept for international trade and cross-border investment. Prior commentators have observed that the nondiscrimination article found in thousands of tax treaties worldwide lacks a coherent guiding principle, and this Essay argues that the explanation for the incoherence of the nondiscrimination article lies in fundamental uncertainty regarding the purpose and function of tax treaties. Rejecting recent suggestions raised by international tax policymakers that the tax treaty nondiscrimination principle should be brought in line the European Union conception of discrimination, this Essay urges a more fundamental reconsideration of the goal of tax treaties and sketches out practical and normative principles that states could use to guide their interpretation of the nondiscrimination article.

Keywords: tax discrimination, nondiscrimination, tax treaty, EC treaty, taxation, OECD, capital export neutrality, capital import neutrality, protectionist taxes, exit taxes

JEL Classifications: H24, H25

Accepted Paper Series