The Role Of Tax Treaties In Preventing Double Taxation
- IJLLR Journal
- Apr 3
- 1 min read
Ashish & Himanshu Saini, Manav Rachna University, Faridabad
ABSTRACT
Tax treaties are essential in reducing the incidence of double taxation, promoting tax fairness, and encouraging global trade and investment. Commonly referred to as Double Taxation Avoidance Agreements (DTAAs), these treaties establish mechanisms to tackle conflicts that arise from simultaneous tax claims by different jurisdictions. By clarifying the rights to tax, introducing credit and exemption approaches, and combating tax evasion, tax treaties enhance economic collaboration between countries.
The evolution of tax treaties has been shaped by multilateral and bilateral agreements, primarily based on models developed by international organisations such as the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN). These treaties seek to fairly distribute taxing rights between the countries of residence and source, preventing over-taxation while allowing governments to raise sufficient revenue. The success of tax treaties is improved by the implementation of anti-abuse measures, mutual agreement procedures (MAPs), and systems for sharing tax-related information among countries.
This paper explores the legal framework governing tax treaties, their significance in international taxation, and their role in curbing tax avoidance and evasion. It highlights the different methods used to prevent double taxation, including the exemption and credit methods. Additionally, the study examines how tax treaties influence global economic activities by encouraging foreign direct investment and reducing tax-related barriers to international trade.
Keywords: Tax Treaties, Double Taxation, DTAAs, Tax Avoidance, International Taxation, Economic Cooperation, OECD, Tax evasion.
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