INTERNATIONAL DOUBLE TAXATION AGREEMENTS AND

INTERNATIONAL DOUBLE TAXATION AGREEMENTS AND
INCOME TAXATION AT SOURCE:
By
CHARLES R. IRISH *
IN a developing country, nobody would propose unrestricted grants
in aid from his country to a developed one. And yet, the practical
effect of the present network of double taxation agreements between
developed and developing countries is to shift substantial amounts of
income tax revenues to which developing countries have a strong legitimate
and equitable claim from their treasuries to those of developed
countries. Concomitantly. these double taxation agreements result
in a very considerable and unnecessary loss of badly needed foreign
exchange reserves for developing countries. In other words, the present
system of tax agreements creates the anomaly of aid in reverse—
from poor to rich countries.
The reason for this anomaly is that the tax agreements currently
in force generally give the country of a taxpayer's residence either the
exclusive or more substantial right to tax income as against the country
in which the income arose (the " source country ") and in income
generating transactions between developed and developing countries
the former is invariably the country of residence and the latter the
country of source.
The purpose of this article is to explain the origins of this anomalous
system, to analyse the reasons for its perpetuation, and to discuss
methods for eliminating or at least ameliorating it. Part I discusses
how the present system originated and analyses the reasons for its
continued vitality. Part II outlines proposals designed to infuse
greater taxation at source in double taxation agreements between
developed and developing countries.
PART I
THE EXISTING NETWORK OF DOUBLE TAXATION AGREEMENTS:
HOW IT DEVELOPED AND THE REASONS FOR ITS PERPETUATION
A. Double Taxation Agreements between Developed Countries
Jurisdiction to tax income is most frequently based upon either the
• Legal Adviser to the Zambian Ministry of Finance; Lecturer in law, University
of Zambia.
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