Tax Treaty Abuse and Treaty Shopping: An Analysis of Countermeasures and Best Practices

Abstract

Understanding tax treaty abuse and treaty shopping is ever critical in today’s modern era. These concepts are complex phenomena that pose significant challenges to global tax systems, with many multinational companies taking advantage of loopholes in tax treaties to avoid paying taxes. This has led to revenue losses for many countries, particularly those in the developing world, and has raised concerns about the fairness and effectiveness of the current tax treaty system. As such, this article investigates the nature and intricacies of tax treaty abuse and treaty shopping, the various techniques employed to perpetrate such acts, and the impact they have on countries’ tax revenues. It further analyses some key countermeasures that are been used to address tax treaty abuse and treaty shopping. This paper concludes by proffering actionable policy recommendations that policymakers, tax authorities, governments, and international institutions can address to minimize the risk of tax treaty abuse and treaty shopping.

Keywords: Tax treaty abuse, Treaty shopping, Countermeasures, International taxation