Arbitration as a Tool to Resolve International Tax Disputes

Abstract

Arbitration has grown tremendously as an effective mechanism in resolving disputes. While it was initially accessed in resolving commercial disputes, the timely resolution of disputes, expertise of the arbitrators and lesser compliances has led to its proliferation. The subject-matter of arbitration has been steadily increasing to an extent that even tax matters, which are considered to be a major contributor to the economic base of any given country is also referred to arbitration. The question whether tax disputes can be arbitrated or not was for long in vogue, receiving different views. This paper tries to identify arbitration as an effective tool on resolving international tax disputes. The paper is divided into two parts for better understanding. The first portion deals with a general understanding of tax and arbitration, while the second deals with the Mutual Agreement Procedure adopted under the Model Tax Conventions and a perusal of BEPS Action Plan 14, which is a part of minimum standards to make dispute resolution more effective.