Judicial Interpretation of Tax Treaties

Judicial Interpretation of Tax Treaties

The Use of the OECD Commentary

Elgar Tax Law and Practice series

Carlo Garbarino

Judicial Interpretation of Tax Treaties is a detailed analytical guide to the interpretation of tax treaties at the national level. The book focuses on how domestic courts interpret and apply the OECD Commentary to OECD Model Tax Convention on Income and on Capital. Adopting a global perspective, the book gives a systematic presentation of the main interpretive proposals put forward by the OECD Commentary, and analyses selected cases decided in domestic tax systems in order to assess whether and how such solutions are adopted through national judicial process, and indeed which of these are of most practical value. The book operates on two levels: firstly it sets out a clear and comprehensive framework of tax treaty law, which will be an important tool for any tax practitioner. Secondly, the book provides crucial guidance on issues of tax treaty law as applied at domestic level, such as investment or business income, dispute resolution and administrative cooperation.


Carlo Garbarino

Subjects: law - academic, tax law and fiscal policy


‘Tax information’ can be defined as ‘knowledge communicated or received concerning taxpayers’ particular facts or circumstances’: information adds new data to that already known, cannot be predicted and resolves uncertainty, so it clearly has economic value. More specifically tax information allows agents (tax authorities) to make choices that yield higher expected payoffs/utility than they would obtain from choices made in the absence of information. Tax information should be understood in the context of the interdependent tax strategies of the RC and the SC. The RC has the predominant strategy in so far as it extends its tax jurisdiction to the foreign income (sourced in the SC) of its residents, and the taxes paid in the SC are fully credited against the taxes paid in the RC. There is however moral hazard and asymmetry of information, because taxpayers may under-report (or not report) in their RC their income produced in the SC. This opportunistic behaviour is, at least in part, determined, on the one hand, by the fact that the RC cannot enforce its extra-territorial legislative tax claims directly in the territory of the SC, and, on the other hand, by the fact that the SCs may offer low or no taxation to non-residents investing in that country and not cooperate with the RC in respect of enforcement of claims by the RC. The result is that the high mobility of passive or financial income leads to an obfuscation of relevant tax information through bank secrecy and other forms of confidentiality pursued by un-cooperative SCs.

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