Revised UN Convention Seeks To Encourage Investment, Combat Corporate Tax Evasion

kristy SRI/ESG News

EVASION New York, Mar 14 2012 6:05PM The United Nations announced today
that it has updated a set of guidelines to prevent double taxation between
countries, as well as to avoid tax evasion, which costs countries $3.1
trillion every year.

The UN Model Double Taxation Convention between Developed and Developing
Countries (the UN Model) is used by countries as a basis for negotiation of
their bilateral tax treaties.

Double tax treaties are agreements to prevent taxing income twice by
allocating taxing rights over this income between two countries. These types
of treaties play a key role in encouraging investment and technology
transfer, while allowing governments to retain taxing rights over the money
that comes from those investments.

“International law places very few limits on the taxation sovereignty of
countries,” Alex Trepelkov, Director of the Financing for Development Office
in the Department of Economic and Social Affairs (DESA), told reporters at a
press conference in New York.

He added that income from cross-border investments may be taxable in both
investor and recipient countries, something which can be prevented by
setting adequate measures in place.

“Double tax treaties play a key role in encouraging investment while
allowing governments to retain appropriate taxing rights over the income
deriving from those investments,” said Mr. Trepelkov.

Armando Lara Yaffar, Chairperson of the Committee of Experts on
International Cooperation in Tax Matters, stressed that “the main objective
of the revision of the UN Model has been to take into account recent
developments in the areas of international tax policies relevant for both
developed and developing countries.”

Mr. Lara Yaffar emphasized that one of the key elements of the UN Model is
its aim to facilitate entry into bilateral tax treaties by developing
countries, which would contribute to attaining their development goals.

The revised model, which had not been updated since 2001, also provides
recommendations on how to combat corporate tax evasion as well as a set of
rules for countries seeking to invest in developing countries.

According to a survey of 145 countries carried out by the Tax Justice
Network, the cost of tax evasion last year amounted to $3.1 trillion in tax
losses, which represents over 50 per cent of all of the countries’ combined
healthcare costs.
For more details go to UN News Centre at