Tax Treaty Overrides: A Qualified Defense of Us Practice

20 Pages Posted: 2 Nov 2005

Date Written: October 12, 2005


The ability of some countries to unilaterally change, or "override," their tax treaties through domestic legislation has frequently been identified as a serious threat to the bilateral tax treaty network. In most countries, treaties (including tax treaties) have a status superior to that of ordinary domestic laws. However, in some countries (primarily the U.S., but also to some extent the U.K. and Australia) treaties can be changed unilaterally by subsequent domestic legislation. This result clearly violates international law. However, since in the same countries courts are likely to follow domestic law even if it violates international law, both taxpayers and the other treaty partner have little practical recourse in the case of a treaty override beyond terminating the treaty, which is an extreme and rarely taken step. Therefore, the OECD in 1989 issued a report urging member countries to refrain from treaty overrides.

This paper argues that the seriousness of the treaty override issue has been exaggerated. In practice, most countries, including the U.S. (which was clearly the target of the OECD Report) rarely override treaties, and when they do, in most cases the override can be justified as consistent with the underlying purposes of the relevant treaty. Moreover, treaty overrides can sometimes be an important tool in combating tax treaty abuse. Thus, I believe that if used correctly, treaty overrides can be a helpful feature of the international tax regime, albeit one that should be used sparingly and with caution.

Keywords: tax treaties, treaty overrides

JEL Classification: H87

Suggested Citation

Avi-Yonah, Reuven S., Tax Treaty Overrides: A Qualified Defense of Us Practice (October 12, 2005). Available at SSRN: or

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

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