Principal Purpose Test and Customary International Law: A Note of Caution

Posted: 10 Jan 2023

See all articles by Alexis Galán

Alexis Galán

affiliation not provided to SSRN

Ricardo García Antón

affiliation not provided to SSRN

Date Written: September 8, 2023

Abstract

The rapid endorsement of the OECD Multilateral Instrument to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) has prompted several commentators to argue that the anti-abuse provision in the MLI, namely the principal purpose test (PPT), could become part of customary international tax law. This article casts some doubt on that possibility. The authors argue that in light of the difficulties in ascertaining customary international law (CIL) and the structural nature of the PPT, it is unlikely that the PPT will become part of CIL. Additionally, the authors take the opportunity to briefly discuss whether the focus on CIL is to some extent a fruitful debate. Instead of emphasizing the source of the norm, which overstates the importance of some norm being “law”, it is the authors’ view that it would be better to focus on improving the quality of the norms regardless of their source.

Full-text Paper

Keywords: MLI, principal purpose test, BEPS

JEL Classification: K33, K34

Suggested Citation

Galán, Alexis and García Antón, Ricardo, Principal Purpose Test and Customary International Law: A Note of Caution (September 8, 2023). In: World tax journal. - Amsterdam. - Vol. 14 (2022), no. 4 ; p. 618-652, Available at SSRN: https://ssrn.com/abstract=4321576

Alexis Galán (Contact Author)

affiliation not provided to SSRN

Ricardo García Antón

affiliation not provided to SSRN

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