House of Representatives
International Tax Agreements Amendment Bill 2003
Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)A$224 billion as at June 2002.
A$71 billion as at June 2002.
Source: Department of Foreign Affairs and Trade.
There are very few multilateral tax treaties, which reflects the widely differing economic interests and unique tax law structures of most countries.
Source: Department of Foreign Affairs and Trade
Possibly reflecting the widely differing economic interests and tax law structures of countries, there are very few multilateral tax treaties.
A common theme in relation to all Australian offshore investment is that a DTA would reduce investor risks by putting in place an agreed framework for taxation of cross-border activities which would prevent double taxation. However, it should be noted that a DTA is not guaranteed to always prevent double taxation. For example, the definition given to certain terms by the internal law of the two countries may result in cases where the treaty allocates the same taxing rights over the same income to both countries. This is a problem with all tax treaties based on the OECD Model.
On the other hand because the proposed DTA is largely based on standard international tax models (which have a body of supporting commentaries) it can be said there is a common international understanding of the meaning of many of its provisions. In addition it contains procedures to enable the two governments to mutually agree on matters of interpretation and application to prevent double taxation.
The requirement for bilateral agreement on reduction of source country taxation is understandable because both countries wish to be assured of reciprocal treatment of their residents.