Responses to Tax Treaty Shopping: A Comparative Evaluation

24 Pages Posted: 8 Oct 2010 Last revised: 27 Oct 2010

See all articles by David G. Duff

David G. Duff

Peter A. Allard School of Law, University of British Columbia

Date Written: June 30, 2010


Over the last 40 years, the world has experienced exponential growth in international trade and investment, as well as the number of bilateral tax treaties which now number roughly 3,000. As the globalization of economic activity has greatly increased opportunities for tax avoidance and evasion, so also has the expansion of the international tax treaty network increased opportunities for taxpayers to take advantage of domestic tax rules and bilateral tax treaties by arranging their affairs in ways that reduce taxes otherwise owing or eliminate them altogether. Regarding many of these arrangements as abusive treaty shopping, the OECD and several member jurisdictions have adopted various responses to this phenomenon, involving the interpretation of treaties as the well as the introduction and application of anti-avoidance rules in domestic law and tax treaties.

This paper reviews and evaluates these responses to treaty shopping, providing a comparative examination of developments in various jurisdictions. Part II discusses the concept of treaty shopping, defining this term for the purposes of this analysis, providing a few examples for illustrative purposes, and explaining why treaty shopping is problematic on policy grounds. Part III considers interpretive responses to abusive treaty shopping, examining recent cases and commentary on the concepts of “residence” and “beneficial ownership” as well as the existence of an anti-abuse principle inherent in tax treaties and international law. Part IV addresses specific and general anti-avoidance rules, both domestic rules and their relationship to tax treaties as well as anti-avoidance rules contained in tax treaties themselves. Based on this analysis, Part V provides general conclusions.

Suggested Citation

Duff, David G., Responses to Tax Treaty Shopping: A Comparative Evaluation (June 30, 2010). Available at SSRN: or

David G. Duff (Contact Author)

Peter A. Allard School of Law, University of British Columbia ( email )

1822 East Mall
Vancouver, British Columbia V6T 1Z1
1-604-827-3586 (Phone)
604-833-8108 (Fax)


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