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2022 World Tax J. 3 (2022)

handle is hein.journals/wldtxjrn2022 and id is 1 raw text is: Vikram Chand,* Alessandro Turina** and Kinga Romanovska*** Tax Treaty Obstacles in Implementing the Pillar Two Global Minimum Tax Rules and a Possible Solution for Eliminating the Various Challenges This article addresses the interaction between the global anti-base erosion rules (GloBE rules, namely, the income inclusion rule, IIR, and the undertaxed payments rule, UTPR) with tax treaties. In particular, the article analyses potential limitations to the application of the IIR by the provisions of article 9 of tax treaties. Further, the article investigates possible obstacles to the application of the IIR to tax treaties that contain tax sparing clauses. The article then conducts a similar analysis with respect to the UTPR, which is assessed from the perspective of article 9 and the non-discrimination provisions of article 24. Furthermore, the article explores whether importing article 9(1) into the list of exceptions to the saving clause would be appropriate, and the related consequences. Thereafter, the article gives an insight into the problem of tax treaty overrides which may arise if the Pillar Two rules are implemented in national legislation without making relevant changes to tax treaties. Moreover, this contribution also explores the dispute resolution instruments available to solve potential tax disputes that could arise when taxation not in accordance with the convention is detected, as well as other tax disputes that could arise from inconsistent application of the GloBE rules. The authors also highlight possible ramifications under non-tax agreements for such situations. In light of the strong arguments made in this article which indicate that conflicts could indeed arise and treaty overrides could occur, the authors put forth a solution in the form of a safeguard clause - as opposed to a saving clause or interpretative MAPs - that policymakers can incorporate in their treaty network to ensure that the GloBE rules can be applied without triggering frictions with tax treaty law. On the other hand, if such a clause is not inserted into tax treaties, then there is a concrete risk that an unforeseen obstacle of considerable magnitude could arise on the path of the Pillar Two initiative. Of course, the Pillar Two rules should be applied within the boundaries of the safeguard clause and if a state goes beyond its authorization, a conflict with the provisions of the treaty could once again arise. This could then possibly give the taxpayers access to MAPs for misapplication or inconsistent application of the Pillar Two rules. Needless to say, such a clause needs to be implemented through a Multilateral Agreement, which the authors discuss in this contribution. Finally, the authors also analyse selected treaty law-related discrimination issues linked to domestic minimum taxes that are being contemplated by several jurisdictions. * Professor in the Tax Policy Center, University of Lausanne, Switzerland. ** Senior Research Associate in the Academic Department of IBFD, Amsterdam, The Netherlands. *** Doctoral candidate at the University of Lausanne, Switzerland. The authors would like to thank the two anonymous reviewers as well as the following for having agreed to provide comments on the first draft of the article: Prof. Gianluigi Bizioli (University of Bergamo), Prof. Luc De Broe (KU Leuven), Prof. Craig Elliffe (University of Auckland), Prof. Pasquale Pistone (IBFD/University of Salerno/WU Vienna), Prof. Luis Eduardo Schoueri (University of Sio Paolo), Prof. Stef van Weeghel (University of Amsterdam), Ms Marlies de Ruiter (EY Netherlands) and Mr Stefaan De Baets (PWC Belgium). All views expressed are those of the authors of this article and all the positions highlighted in the article fall under the responsibility of the authors. WORLD TAX JOURNAL FEBRUARY 2022 13 0 IBFD