The Mistaken Removal of Article 14 from the OECD Model Tax Convention
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The Mistaken Removal of Article 14 from the
OECD Model Tax Convention
KEEFE HAN*
I INTRODUCTION
The Organisation for Economic Co-operation and Development's Model
Tax Convention on Income and on Capital (the OECD Model) is the most
influential and widely followed model tax convention on which Double Tax
Agreements between states are based.' It underpins nearly all of the 3,000-
odd bilateral tax treaties that are currently in force throughout the world.2
And yet despite general acceptance of the OECD Model as the template
of choice, it is still not wholly followed by states. Based on current treaty
practice, states tend to disagree with the OECD's current position on the
taxation of independent personal services.
Prior to the year 2000, the OECD Model provided for the taxation of
independent personal services in a separate article: art 14. However, art 14
was deleted in that year following concerns with its ultimate function and
fit. In the 2000 version and subsequent versions of the OECD Model, the
taxation of independent personal services was assimilated with the taxation
of business profits in one article: art 7. Despite this assimilation, many
states still prefer the OECD's pre-2000 approach.
Many recent Double Tax Agreements continue to provide for the
taxation of independent personal services in a separate article to that of
business profits. Given the stark contrast between model treaty theory
and state practice, this article suggests the OECD made a mistake when it
deleted art 14 from the OECD Model. The first part of this article outlines
how and why the current OECD position on the taxation of independent
personal services arose. It discusses the provisions of the deleted art 14,
art 14's related Commentary and the other articles in the Model that were
relevant to art 14's interpretation. From there it examines the OECD's
reasons for removing art 14 from the Model.
Next, the article looks at how states have responded to the OECD's
decision to remove art 14. It sets out three observations of contemporary
tax treaty theory and practice to show that the OECD's removal of art 14
* BCom/LLB(Hons). The author would like to thank Dr Michael Littlewood of The University of Auckland
Faculty of Law for his helpful suggestions and support.
I OECD Committee on Fiscal Affairs Model Double Taxation Convention on Income and on Capital (1977)
[OECD Model].
2 See generally Christine Lagarde Remarks on the 50th Anniversary of the OECD Model Tax Convention
(2008) 52 Tax Notes Int'l 209; Joanne M Weiner OECD Celebrates 50th Anniversary of Model Tax Treaty
(2008) 51 Tax Notes Int'l 997.](ViewImageLocal?handle=hein.journals/auck16&div=13&collection=&method=preview&ext=.png&size=3)
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The Mistaken Removal of Article 14 from the OECD Model Tax Convention
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