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Factors influencing Australian taxation treaty practice 1946–1976


In the absence of bi-lateral taxation treaties the domestic law of most developed countries contains unilateral provisions aimed at preventing international juridical double taxation. The presence of these measures begs the question of why countries have entered into extensive bi-lateral taxation treaty networks. Once a country has decided to enter into taxation treaties, a related question, is what factors influence the particular provisions that it includes in its treaties.

This paper seeks to assist in answering these questions by examining archival evidence relevant to Australian taxation treaties in the period from 1946 to 1976. The paper traces the influence of eight specified factors on Australian taxation treaty practice in the period reviewed. The factors examined are: (a) economic considerations relating to the current and expected trade and investment flows between Australia and the treaty partner; (b) cultural and political considerations; (c) Australian domestic law considerations (including tax avoidance considerations); (d) Australian revenue considerations and jurisdictional claims; (e) the treaty practice and domestic law considerations of and model treaties developed by the other party in the treaty negotiations; (f) the treaty practice of third countries in their prior treaties with the prospective Australian treaty partner; (g) model treaties developed by international organisations such as the League of Nations, the OECD, and the United Nations; and (h) the development of an Australian model treaty reflecting prior Australian treaty practice. 

The paper finds that, while over the period some factors became more important at the expense of others. For most of the period Australian entry into taxation treaties was linked to an expectation of encouraging greater foreign investment in Australia while maintaining a relatively high level of source country taxing rights and obtaining bi-lateral measures of use in combating international tax avoidance. For most of the period Australian domestic law considerations and prior Australian treaty practice were major factors affecting the technical content of Australian treaties. While gradually moving closer to the OECD model, Australian treaties in this period differ from the model in their structural and certain technical features. Towards the end of the period the relatively insignificant revenue impact of new treaties and Australia’s membership of the OECD influence Australia in entering into new treaties as a normal link between civilised and friendly countries.

Author profile

Assoc Prof Christopher Taylor
John is an Associate Professor at the School of Business Law and Taxation in the Australian School of Business at the University of New South Wales. He spent seven years in private legal practice before becoming an academic in 1985. Since then he has acted as an academic consultant for professional firms, financial institutions and the Australian Government. He was the inaugural Honorary Research Fellow of the Taxation Institute. His research and teaching focus on corporate and international taxation and on capital gains tax. - Current at 01 November 2008
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