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Introduction - Model Tax Conventions - International Taxation - Income TaxExtract Introduction The need for international conformity among tax treaties, the League of Nations first sponsored several groups of experts who drafted model treaties. International tax treaties were developed to avoid the assertion of taxing jurisdiction by more than one country over the same person or item of income. Tax treaties attempt to provide a rational solution to the problems of such double taxation. International tax treaties were developed to avoid the assertion of taxing jurisdiction by more than one country over the same person or item of income. Tax treaties attempt to provide a rational solution to the problems of such double taxation. Recent treaties have also begun to include procedures for consultation between the taxing authorities of the two countries and procedures for the exchange of tax information. In order to enable various countries to enter into treaties, which are standardized to some extent Organization for Economic Co-operations and Development (OECD) and the United Nations(UN) have development certain Model tax treaties. These treaties can be used by various countries as a starting point in their negotiations with other counties. while these Models are not legally binding, they have been extensively used by various countries as a reference point while entering into tax Treaties. The Significant models conventions have been briefly discussed thereunder. OECD Model The emergence of present form of OECD Model convention can be traced back to 1927, when the fiscal committee of the League of Nation prepared first draft of model Form applicable to all countries. In 1946 the model convention was publised in Geneva by the Fiscal committee of U.N. Social Economic Council and later by the Organisation for European Economic Co-operation (OEEC) in 1963. In 1961, the Organisation for Economic cooperation and development (OECD) was established, with developed countries as its members, to succeed thee OEEC and OECD approved the draft presented to the OEEC. In 1977, the final draft was prepared in the present form which has been revised several times; the latest being in the year 2017 OECD Model convention is essentially a model treaty between two developed nations. This model advocates based taxation, i.e. it lays emphasis on the right of state of residence to tax the income. UN Model The United Nations Model Double Taxation Convention between Developed and Developing Countries (the United Nations Model Convention) forms part of the continuing international efforts aimed at eliminating double taxation. These efforts were begun by the League of Nations and pursued in the Organisation for European Economic Co-operation (OEEC) (now known as the Organisation for Economic Co-operation and Development (OECD)) and in regional forums, as well as in the United Nations, and have in general found concrete expression in a series of model or draft model bilateral tax conventions. The United Nations Model Convention generally favours retention of greater so called source country taxing rights under a tax treaty the taxation rights of the host country of investment as compared to those of the residence country of the investor. This has long been regarded as an issue of special significance to developing countries, although it is a position that some developed countries also seek in their bilateral treaties. By its resolution 1980/13 of 28 April 1980, the Economic and Social Council renamed the Group of Experts as the Ad Hoc Group of Experts on International Cooperation in Tax Matters (the Ad Hoc Group of Experts) recognizing the importance of non tax treaty-related international tax cooperation issues. In 1968, united Nations set up an Ad Hoc Group of experts from various developed and developing countries to prepare a draft model convention between developed and developing countries. In 1980, this Group finalised the UN Model Conventions (UN MC) in its present form. Since its first publication in 1980, the model has been updated previously in 2001, 2001 and 2017. The latest updation was in year 2021. The UN Model convention is a compromise between the source principle and the residence principle. However, it gives more weight to the source principle as against the residence principle of the OECD Model convention. UN Model is designed to encourage flow of investment from the developed countries to developing countries. it takes into account sharing of tax-revenue with the country providing capital. US Model - This Model Convention is used by the United States while entering into tax treaties with various countries. The US Model Convention was last revised in 2016
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