International Tax Law Developments in the Tax Treatment of Interest, Royalties and Other Flows of Income: The Case of Suriname
Irma Johanna Mosquera Valderrama
The Hague University
March 1, 2008
THE SURINAM PAPERS, I.J.Mosquera Valderrama and K.L.H. van Mens, eds., SDU Fiscale & Financiële Uitgevers, Amersfoort, The Netherlands
In the context of globalization, developing and developed countries are facing challenges. Among these challenges are the increase of cross-border activities due to the openness of the economies, the higher mobility of capital than labour, the technological changes resulting in the ability to move funds electronically, and the relaxation of exchange controls. More specifically, in taxation, one outcome of globalization is tax competition where countries introduce new rules to attract portfolio and direct investment. Another outcome is that tax law makers but also tax administrations are confronted with new challenges in order to prevent tax erosion or flights of capital income. Nowadays, what this all means is that the current process of globalization has to do among others with easy access to information and markets, the reduction in the costs for transportation for goods, persons, capital; the introduction of tax rules to attract investment, the modernization and exchange of information among tax administrations, the transfer of sovereignty to supranational or international institutions, and the introduction of free trade agremeents and tax treaties around the world.
Countries are adopting reforms in taxation and trade in order to face these challenges. For instance, Suriname started a process of liberalization and openness that result in the adoption of tax and trade policies in the 1990’s. In trade, Suriname aims to open the market to attract foreign investment. For this purpose, Suriname became a member of the Caribbean Common Market Treaty (CARICOM), and it started to negotiate free trade agreements on a multilateral and bilateral level. In taxation, Suriname aims to become more competitive in the region and to attract foreign investors. For this purpose, tax reforms are taking place in the field of direct taxation including the negotiation of tax treaties and indirect taxation including the introduction of value added tax in Suriname.
The approach in this paper is from a tax law perspective and more specifically deals with direct taxation (leaving outside value added tax issues). In this context, this paper aims first to analyze the current tax system from a domestic and international tax perspective. This paper focuses on the current discussion of a proposed Income Tax Act and the negotiation of bilateral tax treaties from a legal perspective. Economic studies on whether bilateral tax treaties promote investment will not be dealt with in this paper. More specifically, this paper analyzes the international tax law developments in the tax treatment of interest, royalties, and management fees in Suriname. Finally, this paper aims to propose recommendations for Suriname in order to increase its competitiveness, but also to improve its domestic and international tax system.
Number of Pages in PDF File: 21
Keywords: tax, development, developing countries, Suriname, tax administration, tax policy, interest, royalties, passive income, globalization
JEL Classification: O19, N26, K34, H87, H20Accepted Paper Series
Date posted: February 5, 2010 ; Last revised: March 14, 2010
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