The Interpretation of Bilateral Tax Treaties: Changing Tax Law – Unchanging Treaty Obligations?

Abstract

This thesis puts forward an integrative approach for the construction of a legal framework that may guide the resolution of temporal questions of interpretation arising from central features of model-based bilateral income tax treaties. It does so through extensive analyses of principles for temporal treaty interpretation drawn from international law, and as enumerated in the Vienna Convention on the Law of Treaties (1969), as well as legal sources and interpretive techniques typically employed by domestic courts in cases selected for analysis. Seventy-eight decisions by the courts of 23 countries falling within defined parameters were analysed. The selected cases focussed on temporal questions arising from domestic tax laws or OECD Model Commentaries that post-date the conclusion of a tax treaty. The judicial techniques identified were compared to the theoretical framework comprised of legal principles and norms for the resolution of these types of interpretive disputes. Key findings reveal a general tendency in domestic courts to treat international law as static, resulting in an incomplete accumulation of relevant principles for the resolution of temporal questions of tax treaty interpretation. A particularly important finding concerns absence of systemic integration of international law principles by domestic courts, which exacerbates the fragmented development of legal frameworks. A series of propositions are formulated to enable interpreters to assemble principles, identify their sources, and construct the legal framework for their application to enhance the legitimacy of the outcome, provide confidence to others that a theoretically responsible process was followed and assurance that the consequences of their invocation were considered on all impacted parties. The aim is to enhance uniformity of approach, and therefore predictability, in disputes raising comparable questions of temporal interpretation of similarly worded bilateral income tax treaties.