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Investments: Revised UN convention seeks to prevent double taxation

The UN said it has updated a set of guidelines to prevent double taxation between countries, as well as to avoid tax evasion which costs countries US$3.1 trillion every year, in order to promote investments.

PANA reports that the UN Model Double Taxation Convention between Developed and Developing Countries (the UN Model) is used by countries as a basis to negotiate their bilateral tax treaties.

”Double tax treaties are agreements to prevent taxing income twice by allocating taxing rights over this income between two countries,” Alex Trepelkov, Director of the Financing for Development Office in the UN Department of Economic and Social Affairs (DESA), told UN reporters on Wednesday in New York.

”These types of treaties play a key role in encouraging investment and technology transfer, while allowing governments to retain taxing rights over the money that comes from those investments,” he said, adding that international law places very few limits on the taxation
sovereignty of countries.

He said income from cross-border investments may be taxable in both investor and recipient countries, something which can be prevented by setting adequate measures in place.

”Double tax treaties play a key role in encouraging investment while allowing governments to retain appropriate taxing rights over the income deriving from those investments,” Trepelkov said.

On her part, Armando Lara-Yaffar, Chairperson of the Committee of Experts on International Cooperation in Tax Matters, said the main objective of the revision of the UN Model ”has been to take into account recent developments in the areas of international tax policies relevant for both developed and developing countries”.

PANA learnt that the revised model, which had not been updated since 2001, also provides recommendations on how to combat corporate tax evasion as well as a set of rules for countries seeking to invest in developing countries.

According to a survey of 145 countries carried out by the Tax Justice Network, the cost of tax evasion last year amounted to US$3.1 trillion in tax losses, which represents over 50 per cent of all of the countries’ combined healthcare costs.

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