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5 Colum. J. Tax L. 1 (2013-2014)

handle is hein.journals/colujoutl5 and id is 1 raw text is: ARTICLES
Income Tax Treaty Policy in the 21st Century:
Residence vs. Source
Bret Wells*
Cym H. Lowell-
The United States has repeatedly attempted to stop tax base erosion for almost
the entire post-World War I era, and yet the same problems exist today. The need for
fundamental tax reform is front-page material in the major newspapers with the US
transfer pricing rules and US multinationals portrayed as public enemy #1. The OECD
this month issued a report entitled Addressing Base Erosion and Profit Shifting,  and in
a competing fashion several important developing countries have initiated their own pact
to develop cooperative strategies on these issues outside of the framework of the OECD
and UN.
The attached manuscript studies the historical record and sets forth a competing
model for dealing with these matters which pre-dated the existing model treaties and
transfer pricing paradign This earlier paradigm was offered by the International
Chamber of Commerce's but was prematurely abandoned by the League of Nations in
favor of the existing paradign In light of the fact that the existing paradigm has failed
so miserably, the earlier proposal should be re-considered.
In the inevitable re-examination process, there will be a fascinating range of
political, economic, and business issues to be addressed. Tax administrations will need to
ascertain how their resources could be redeployed to foster economic growth. MNEs will
need to assess the impact of new treaty concepts on their global effective tax rate
planning models.
The critical question is who will initiate the evolution to come. All countries are
anxious to protect their respective tax bases. At the present time, it appears that the
BRICS and Source Countries have planted their stake in the sand, rejecting the existing
order and declaring an intention to update the rules that apply to their own tax base
defense. The OECD appears to be principally driven by the need to defend its Member
country tax bases, hoping, no doubt, that BRICS and Source Countries will ultimately
follow its lead. Whichever organization emerges as the new-found thought leader on
these questions, it is now time to give the original International Chamber of Commerce
recommendation a fair consideration on its merits (which, interestingly, addresses the
current concerns of BRICS and Source Countries).
* Bret Wells, B.B.A. Southwestern University 1987, J.D. University of Texas 1989, is Assistant
Professor of Law at the University of Houston Law Center.
**Cym H. Lowell, B.S. Indiana University 1969, J.D. Duke University School of Law 1972, is a
partner in McDermott Will & Emery and Vice Chair of the Taxation Commission of the International
Chamber of Commerce. The authors wish to thank Professor Douglas Schmalbeck of the Duke University
Law School faculty for a fascinating dialogue concerning an initial draft of this article. His thoughtful
comments and observations were instrumental in finalizing our thoughts.

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