An Albatross Around the Neck of Developing Nations – MFN Clause in Tax Treaties
By Deepak Kapoor, IRS
The Most Favoured Nation (“MFN”) clause in double taxation avoidance conventions epitomises the basic principle of non-discrimination and intends to bring parity in business and investment opportunities among treaty partner countries and jurisdictions. Inclusion of provisions like MFN and non-discrimination clauses in tax treaties are intended to promote equity among treaty partners. In the context of tax treaties between developed and developing countries, the MFN clauses also act as negotiating tools to bargain for better treaty tax rates.
However, lately these clauses have started demonstrating disadvantageous effects for the source countries, which are mostly developing countries. The MFN clauses generally do not appear to be creating potential risks if they are operational between two equally developed countries but when the relationship is between a developed and developing country, where one partner receives more investments from the other than it makes, such risks are inevitable. Lately, problems have started arising due to various interpretations of the MFN clauses by the courts forcing the source countries to extend benefits of reduced rates and restricted scope to treaty partner countries under the MFN rules. Such beneficial interpretations have gone beyond the basic objective and purpose of the MFN clauses.
In light of recent court cases in South Africa and India, it appears that the MFN clauses are creating opportunities for “reduced taxation” and leading to unintended erosion of tax base of source countries. The problem also lies with the ambiguous drafting and formulations of the MFN clauses, which eventually leads to unexpected negative outcomes for countries who have bound themselves with the future commitments. Therefore, a comprehensive review of existing MFN clauses in tax treaties, their cross connections and possible negative spill over effects to other treaties is the urgent need of the hour for the source jurisdictions.
Precios justos para la cobertura sanitaria universal: El impacto de la judicialización de la salud
Por Silvina Andrea Bracamonte y José Luis Cassinerio
En el presente trabajo se describen las principales directrices y recomendaciones sobre políticas de precios para ayudar a los países a desarrollar estrategias efectivas, como herramientas para lograr el acceso equitativo a los productos sanitarios con precios asequibles, desechando el creciente fenómeno de la judicialización de la salud como vía adecuada para abordar con un enfoque sistémico esta problemática compleja.
Article 12B – A tax treaty solution by the UN Tax Committee for taxing digital incomes
By Rajat Bansal
Taxation of income of multinational enterprises engaged in digitalised businesses by source or market jurisdictions is currently the most important challenge before the international tax community. The current membership of the United Nations Tax Committee in April 2021 finalised a tax treaty solution to address this challenge. This brief explains the rationale for coming up with a particular solution of inserting a new Article in the United Nations Model Tax Convention, its merits and how it can be beneficial for all countries, especially the developing ones.
UNCITRAL Working Group III: Moving forward towards consensus or loosing balance?
By Daniel Uribe and Danish
This policy brief considers some concerns arising from the ongoing discussions on procedural reform of investor-State Dispute Settlement (ISDS) in the United Nations Commission on International Trade Law (UNCITRAL) Working Group III. It highlights the need to allocate sufficient time to deliberate upon the important issues being raised by developing countries. It further discusses some structural reform options that have been identified by the Working Group and reflects on some concerns arising from a possible ‘single undertaking’ approach being implemented through a future possible multilateral agreement on ISDS.
Un nouveau traité international de l’OMS sur la préparation et la riposte aux pandémies : pourra-t-il répondre aux besoins des pays du Sud ?
Par Dr. Germán Velásquez et Nirmalya Syam
Dans un récent communiqué signé par 25 chefs de gouvernement et le Directeur général de l’OMS, ceux-ci ont appelé à la négociation d’un traité sur les pandémies afin de permettre aux pays du monde entier de renforcer les capacités et la résilience des pays aux niveaux national, régional et mondial face aux futures pandémies. La pandémie de COVID-19 a démontré la fragilité des mécanismes dont dispose l’OMS pour se préparer et réagir aux pandémies. L’utilisation d’instruments contraignants pour promouvoir et protéger la santé dans le contexte des pandémies est nécessaire. Si les États Membres de l’OMS décident que le recours à un traité international de préparation et de riposte aux pandémies est la voie à suivre, il serait important de clarifier dès le départ les éléments et les domaines qui feront l’objet de négociations. La première étape devrait consister à identifier les aspects de la préparation et de la réponse aux pandémies dont la crise actuelle a révélé les inefficacités, et à déterminer comment s’appuyer sur les instruments existants, notamment le Règlement sanitaire international (RSI). Ce document examine certaines des questions essentielles qui devraient être abordées dans un tel traité si les négociations sont lancées, en tenant compte des besoins des pays à niveaux de développement différents et des capacités disparates pour mettre en œuvre les obligations découlant du traité.
Un nuevo tratado internacional de preparación y respuesta ante pandemias: ¿Podrá atender a las necesidades del Sur Global?
Por Germán Velásquez y Nirmalya Syam
Un reciente comunicado conjunto de 25 Jefes de Gobierno y el Director General de la OMS han pedido que se negocie un tratado sobre pandemias que permita a los países de todo el mundo reforzar las capacidades y resiliencia nacionales, regionales y mundiales ante futuras pandemias. La pandemia del COVID-19 ha demostrado la fragilidad de los mecanismos a disposición de la OMS para la preparación y la respuesta a las pandemias. Es necesario utilizar instrumentos vinculantes para promover y proteger la salud en el contexto de las pandemias. Si los Estados miembros de la OMS deciden que el camino a seguir es un tratado internacional para la preparación y respuesta a las pandemias, sería importante tener claro desde el principio los elementos y áreas que serán objeto de negociación. El primer paso debe ser identificar los aspectos de la preparación y la respuesta ante una pandemia que la crisis actual ha puesto de manifiesto que no funcionan, y cómo aprovechar los instrumentos existentes, especialmente el Reglamento Sanitario Internacional (RSI). Este documento analiza algunas de las principales cuestiones que deberían abordarse en un tratado de este tipo si se inicia la negociación, teniendo en cuenta las necesidades de países que están en diferentes niveles de desarrollo y con capacidades dispares para aplicar las obligaciones del tratado.
Investment Policy Options for Facing COVID-19 Related ISDS Claims
By Daniel Uribe and Danish
Developing and least developed countries have undertaken a number of measures to fight against the multidimensional impacts of the COVID-19 pandemic. Such measures and those that may be adopted in the context of the recovery efforts are, however, susceptible to challenges by foreign investors using investor-State dispute settlement mechanisms.
This policy brief first considers the kinds of measures States have adopted to limit the spread of COVID-19, protect their strategic sectors and promote economic recovery, including through foreign investment aftercare and retention. It then addresses how the investor-State dispute settlement system (ISDS) has been used by investors in times of crises, based on the analysis of the awards in several cases brought against both developed and developing countries.
Against this backdrop, the brief elaborates on the different options and initiatives States can take for preventing ISDS claims at the national, bilateral, regional and multilateral levels. It concludes with some policy advice for developing and least developed countries to face possible COVID-19 related ISDS claims in the future.
Systemic reform of the international debt architecture is yet to start
By Yuefen Li
The COVID-19 pandemic has pushed the reform of the international debt architecture to the policy agenda. Up to now policy measures to address the crushing debt burden of developing countries have focused on boosting time bound liquidity provision, which is insufficient in amount and restrictive in scope as debt-ridden and pandemic struck middle-income countries have not been covered. Even the implementation of these policy measures has been hindered by existing systemic problems. The reform of the debt architecture is yet to start. However, complacency seems to emerge. The risk of “wasting” the crisis should be avoided.
The Role of Courts in Implementing TRIPS Flexibilities: Brazilian Supreme Court Rules Automatic Patent Term Extensions Unconstitutional
By Vitor Henrique Pinto Ido
This policy brief provides a background, summary and analysis of the Brazilian Federal Supreme Court decision of 6 May 2021 that ruled automatic patent term extensions unconstitutional, striking down Article 40, Sole Paragraph, of the Brazilian Industrial Property Code of 1996. It concludes that this is a landmark ruling that contributes to the implementation of a more balanced patent regime in Brazil, with a positive impact on access to medicines in the country. It is an important precedent in relation to the role that courts may play in defining the contours of intellectual property protection and the TRIPS flexibilities.
Recent changes to the United Nations (UN) Model Tax Convention have resulted in provisions that are more advantageous for developing countries in raising revenue through international taxation, i.e. taxation of foreign income. These include taxation of income from automated digital services, software payments, capital gains and others. Normally, these would be incorporated into bilateral tax treaties through time-taking negotiations. A UN Multilateral Instrument (MLI) provides a speedy manner for updating multiple tax treaties through a single negotiation. This will help developing countries in collecting revenue more quickly. This Policy Brief discusses the possible structure of such an MLI.
The Tax Sovereignty Principle and Its Peaceful Coexistence with Article 12B of the UN Model Tax Convention
By Kuldeep Sharma, ADIT (CIOT, UK)
Article 12B of the United Nations (UN) Model Tax Convention (MTC) provides developing countries with a practical and easy way to administer policy solutions for taxing the digital economy, in particular income from Automated Digital Services. It merges seamlessly with the existing provisions of the UN MTC and it is completely aligned and coexistent with the Tax Sovereignty Principle.
A New WHO International Treaty on Pandemic Preparedness and Response: Can It Address the Needs of the Global South?
By Dr. Germán Velásquez and Nirmalya Syam
A recent joint communiqué by 25 Heads of Government and the WHO Director-General have called for the negotiation of a pandemic treaty to enable countries around the world to strengthen national, regional and global capacities and resilience to future pandemics. The COVID-19 pandemic has demonstrated the fragility of the mechanisms at the disposal of WHO for preparedness and response to pandemics. The use of binding instruments to promote and protect health in the context of pandemics is needed. If WHO Member States decide that an international treaty to prepare and respond to pandemics is the way forward, it would be important to have clarity from the outset on the elements and areas that will be the subject of negotiation. The first step should be to identify the aspects of pandemic preparedness and response that the current crisis has revealed are not working, and how to build up on the existing instruments, notably the International Health Regulations (IHR). This paper discusses some of the critical issues that should be addressed in such a treaty if negotiations are launched, in view of the needs of countries at different levels of development and with disparate capacities to implement treaty obligations.
