History and Principles The Tax Treaty System The International Tax System at the Crossroads 64 International Tax Avoidance 77

TABLE OF CONTENTS

Chapter 1 History and Principles

1. Global Business and International Taxation 1 2. The Rise of Business Taxation 2 a Taxing Residents on Income from All Sources 4 i Britain and the Broad Residence Rule 4 ii Germany: Residence Based on Management 4 b Taxing the Profits of a Business Establishment: France 10 c The USA: The Foreign Tax Credit 11 3. The Campaign against International Double Taxation 14 a Britain and Global Business 14 b National and International Double Taxation 16 4. Origins of the Model Tax Treaties 18 a The Economists Study and the Work of the Technical Experts 19 b The 1928 Conference and the Model Treaties 22 c The Fiscal Committee and Inter­War Treaties 24 5. Allocation of the Income of Transnational Companies 27 a The Carroll Report and the Problem of the Transfer Price 27 b The 1935 Allocation Convention 31 c Limitations of the Carroll Report and the League Approach 32 6. Conclusion 35

Chapter 2 The Tax Treaty System

38 1. Postwar Development of the Bilateral Treaty Network 39 a The US­UK Treaty Negotiation 39 b International Oil Taxation 42 c International Investment and Tax Equity or Neutrality 45 2. The Role of International Organizations 48 a The Mexico and London Drafts and the UN Fiscal Commission 49 b The OECD Fiscal Affairs Committee 52 c Developing Countries and the UN Group of Experts 55 d International Co­ordination and Tax Treaty Negotiation 58

Chapter 3 The International Tax System at the Crossroads 64

1. The Interaction of National and International Equity 65 2. The International Crisis of Tax Legitimacy 68 a The Movement for Tax Reform 68 b European Community Harmonization 72

Chapter 4 International Tax Avoidance 77

1. The Legal Regulation of Economic Relations 77 a Liberal Forms and their Limits 79 b Fairness, Efficiency and Legitimacy in Taxation 82 2. Taxation of Revenues and Opportunities for Avoidance 83 3. The Economics, Politics and Morality of Avoidance 86 a The Business Purpose Rule 87 b General Statutory Anti­Avoidance Rules 89 c Abuse of Legal Forms 90 d Tax Planning 91 4. International Investment and Tax Avoidance 93

Chapter 5 The Dilemma of Deferral