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22 Supremo Amicus [1] (2020)

handle is hein.journals/supami22 and id is 1 raw text is: SUPREMO AMICUS VOLUME 22 ISSN 2456-9704 THE CONTRAST IN FAVOURING THE DEVELOPED AND DEVELOPING NATIONS: UN MODEL CONVENTION AND THE OECD MODEL CONVENTION By Yoshita Kumar From Gujarat National Law University ABSTRACT Tax treaties are considered as the agreements between independent tax jurisdictions, whose main purpose is to allocate the taxing rights between these states. It can be understood that an individual or a corporate body has to pay tax in the country in which the income is earned and also in the country in which the person is a resident, in essence to say the source jurisdiction and the Resident jurisdiction. It is clear that here the person would be charged double for the single income he earned and therefore tax treaties are entered into so as to avoid double taxation. There are two major treaties 1. OECD (Organization for Economic Co- operation and Development Model Convention on Income and on Capital) Model Convention on Income and on Capital. 2. UN (United Nations) Model Double Taxation Convention between Developed and Developing Countries. Both The OECD and UN model income tax treaties were designed in a way to reduce the proportion of income that would be allocated to source countries, with the residue allocated to residence countries. ' Veronika Daurer & Richard Krever, Choosing between the UN and OECD Tax Policy Models: an African Case Study, CADMUS, 12 (2012), But over the years it can be understood that the OECD Model Convention favours more to the side of developed countries with respect to tax treaties whereas the UN Model Convention is made to favour the developing countries and is considered a very important treaty for developing countries to refer to while entering into a tax treaty. In this paper we will analyse the reasons as to how and why these treaties are made in such a way. INTRODUCTION The Model tax conventions are drafted in a standard format and are made for the purpose of assisting in better negotiation for the bilateral agreement of tax between States. Treaties are not meant to allocate taxing right to the countries but restricting their taxing right to so to prevent double taxation. Certain treaties limit the source country's taxing right and leaves more room for the host country in which the investor or the business person is a resident of to collect tax. In cases where two capital exporting countries are involved it generally has a low impact on the source country's taxing right as both the jurisdiction sacrifice to the other's taxing right. Where one country is capital importing then the treaty shifts that taxing right to the richer country from the poorer one.1 In general, in the OECD Model the source state may tax the business profits derived from activities within the source state. The state in which the company is tax resident is, by means of the specific tax treaty, not allowed to tax those profits, although this https://cadmus.eui.eu/bitstream/handle/1814/24517/R SCAS_2012_60rev.pdf?sequence=3. www.supremoamicus.org PIF 6.242

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