The Arbitration Convention (90/436/EEC) and its contribution to corporate tax harmonisation in the European Union

Abstract

Company taxation is one of the few policy areas where the European Council can only adopt legislative measures by unanimity, which explains why fiscal measures are so difficult to pass and why progress has dragged. In the context of the realisation of the European Monetary Union and the introduction of the Euro, the resulting cross-border price transparency and the elimination of exchange risks and costs will render cross-border capital flows more sensitive to taxation - hence the utmost relevance of progress in the field of tax harmonisation. In this thesis, the author seeks to analyse the role of arbitration as a mode of international tax dispute resolution, and the contextual position of the EC Tax Arbitration Convention in the picture of the corporate tax harmonisation programme of the EC. In the first chapter, the author reviews the process of corporate tax harmonisation and analyses the meaning, and the different forms, of harmonisation. The economic justifications therefor are identified, an outline is given of the Community's painful progress in the direction of integration and the goals achieved so far are discussed in terms of their legal basis. The development of legal thought on methods of disputeresolution in the fiscal field is traced back to the first double taxation conventions in the second chapter. Various author's proposals for the role of arbitration as a mode of dispute resolution in the field of international taxation are considered and the rise of arbitration is traced until the current day. The adoption and mechanism of the EC Tax Arbitration Convention is the focus of this thesis. Chapter three tackles the subject matter and scope of the Convention and discusses in depth the workings and implications of the various stages of the procedures contemplated thereby. The final chapter consists of an evaluation of the Convention, identifying its strengths and weaknesses, and finishes with a number of suggestions for the review of the Convention. What makes the EC Tax Arbitration Convention so revolutionary in the field of international tax is the concept of a procedure which compels the competent authorities of the MSs to eliminate double taxation adequately and within a reasonable time frame, without impinging too much on the fiscal sovereignty so dear to the MSs. But how really effective has the Convention been? What conclusions can we draw that activity under the Convention has since been negligible? Will all the MSs ratify the protocol extending the duration of the Convention by another five years, or will the measure die a premature death?