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Choosing between the UN and OECD Tax Policy Models: An African Case Study

Choosing between the UN and OECD Tax Policy Models: An African Case Study I. INTRODUCTION Most of the world's income tax systems impose tax on the worldwide income of their residents and on profits with a source in the country where the income is derived by a non-resident. In the event of cross-border investments or business activities, two jurisdictions may wish to tax the same profits: the source country because the income is attributable to factors within that country and the residence country because all residents are taxed on their worldwide incomes. In the absence of any agreement between the source country and the residence country of the cross-border investor or business operator, the source country would have primary taxing rights if only because it is in a position to extract the tax before the profits are repatriated to the residence country. Unless the residence country wished to double tax the income and in effect discourage any outward investment or business activities by its residents, it will have no choice but to forgo its claimed taxing rights and limit its tax to the difference, if any, between a lower tax rate imposed in the source country and a higher rate imposed in the residence country. Wealthier countries, particularly OECD nations, very http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Journal of International and Comparative Law Edinburgh University Press

Choosing between the UN and OECD Tax Policy Models: An African Case Study

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Publisher
Edinburgh University Press
Copyright
© Edinburgh University Press 2014
Subject
Articles; African Studies
ISSN
0954-8890
eISSN
1755-1609
DOI
10.3366/ajicl.2014.0077
Publisher site
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Abstract

I. INTRODUCTION Most of the world's income tax systems impose tax on the worldwide income of their residents and on profits with a source in the country where the income is derived by a non-resident. In the event of cross-border investments or business activities, two jurisdictions may wish to tax the same profits: the source country because the income is attributable to factors within that country and the residence country because all residents are taxed on their worldwide incomes. In the absence of any agreement between the source country and the residence country of the cross-border investor or business operator, the source country would have primary taxing rights if only because it is in a position to extract the tax before the profits are repatriated to the residence country. Unless the residence country wished to double tax the income and in effect discourage any outward investment or business activities by its residents, it will have no choice but to forgo its claimed taxing rights and limit its tax to the difference, if any, between a lower tax rate imposed in the source country and a higher rate imposed in the residence country. Wealthier countries, particularly OECD nations, very

Journal

African Journal of International and Comparative Law – Edinburgh University Press

Published: Feb 1, 2014

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