The History of Royalties in Tax Treaties 1921-61: Why?
Richard J. Vann
University of Sydney - Faculty of Law
December 14, 2010
COMPARATIVE PERSPECTIVES ON REVENUE LAW: ESSAYS IN HONOUR OF JOHN TILLEY, pp. 166-196, J. Avery Jones, P. Harris, D. Oliver, eds., Cambridge University Press, 2008
Sydney Law School Research Paper No. 10/143
This paper consider the history of the tax treaty rule on royalties up to the emergence of the modern form, the borders of the provision and the fundamental question of why we have it (viewed from an historical perspective). In the modern context of the OECD Model with zero taxation at source on royalties, the why is indeed a mystery. The work of the royalties article as it has been drafted at various times is already effectively covered by the modern forms of the business profits, capital gains and other income articles so why not abolish it like the OECD recently did for the article on independent personal services. For many such a suggestion may seem shocking – after all the royalties article is often viewed as critical in modern policy and political debates on source taxation and the fair sharing of revenues among countries, especially for smaller and developing countries. A review of the history of the royalties article suggests, perhaps surprisingly, that its development was as much concerned with technical and structural tax treaty issues as with the broader issues.
Keywords: Double Taxation, History, International Taxation, League of Nations, OECD, Royalties, Tax Treaties
JEL Classification: K10, K30, K33, K34
Date posted: December 15, 2010 ; Last revised: December 19, 2010