Abstract
M.Com. (South African and International Taxation)
International tax treaties are unique bilateral negotiations effectively breaking down the
barriers of international trade while aiming to eliminate double taxation and prevent fiscal
evasion. The implementation of these negotiated tax treaties is a matter of domestic law, once
concluded a contracting state is free to use domestic legislation to tax the income allocated
through the these tax treaties. There is however, no external enforcement of these agreements
and as a result disputes occur.
The remedy proposed by both the OECD MTC and the UN MTC is what we know as MAP.
MAP is a non-binding, non-compulsory dispute resolution mechanism developed in the early
20th century. Even though many jurisdictions remain of the view the MAP is a successful
method of dispute resolution, others feel that it has significant shortcomings as outlined by the
JWG established by the OECD in 2003. As a result of the work done by the JWG and in an
attempt to address some of the insufficiencies of the MAP the OECD introduced additional
articles to the MTC including guidelines on non-binding arbitration. The UN subsequently
introduced similar guidelines in its MTC. The introduction of mandatory arbitration into both
these MTCs is the most significant development in the resolution of international tax disputes.
However, the increased complexity and volume of international trade undoubtedly results in
tax implications that are not currently addressed in tax treaties or conventions. Differences in
the interpretation of the underlying facts of those trade transactions may lead to a host of
international tax disputes, often resulting in juridical double taxation. With MAP being the only
remedy available, this study aims to determine whether or not the MAP in its current form, is
an effective international dispute resolution mechanism or whether further developments are
still required.