(17th meeting) - Fifth Session of the Intergovernmental Negotiating Committee on the UN Framework Convention on International Tax Cooperation (INC Tax) - 3 to 13 August 2026

I But there were thinking that and I were demanding when we're going to adjoin session today.
Everyone I that I Yeah, say You It's that Let me see if Yes.
Ended up Okay.
Be doing this? I Good morning.
It's me again.
Can we all move towards can we all move towards our seats, please? And the quicker that we are able to do that, then the earlier we'll be able to leave today.
Yes.
Thank you so much for your cooperation.
All right.
So we're going to continue the discussions this morning on the protocol, Protocol two, and I'm going to hand over to my colleague Michael as he takes us through the discussion this morning.
Thank you very much, Malene.
Good morning, colleagues and friends from member states and stakeholders following us in the room and online.
I can imagine that some of you are very sad since those two weeks are coming to an end.
But the good news is that we still have the pleasure of discussing Workstream three Protocol two this morning.
Um, if we're all making an effort, we may even be able to conclude our discussions by lunchtime.
That means please everyone try to stay within 3 minutes in your interventions.
It is a moving target.
We cannot make any promises.
Same is true for coffee breaks.
But when I look in the rooms, it looks like everyone is well prepared.
So before we continue, let me briefly look back at yesterday.
And first, there is an important disclaimer or a caveat, so it is just my own personal impression.
It is not meant to replace the transcript of yesterday's discussions.
So first, there were many interventions that actually related more to Chapter five and were related to the concept of optionality and core mechanisms.
That is one of the reasons why I'm optimistic that we might conclude today a little bit earlier because I assume that some interventions were already made yesterday.
From yesterday, I took that there is still considerable support for the concept of optionality.
Still, there are very different preferences on what should be a core prevention mechanism.
It's different with the resolution mechanisms.
I think it's fair to say that the MAP provision is a very good candidate.
Um, For the moment, we think it is useful to leave that question aside.
As we were also saying yesterday, let's instead focus on keeping an open mind and giving it a try to make each mechanism as effective and as attractive as possible.
We encourage all of you not to approach the discussion from the perspective that you might eventually before or be asked to implement and apply any of the mechanisms.
Um, I would like to add that the same is true for the same appeal applies to arbitration.
On arbitration, the room is clearly divided.
We have again heard strong opposition among some members.
Nevertheless, here too, let us focus and let us try to focus on how we can improve the mechanism.
Rather than only to whether it should exist in the first place.
Yesterday, some delegations made some very interesting points in the context of arbitration that were related to ISDS, and I take from yesterday's discussion that there is some appetite to investigate and explore further what can be done in that regard.
It also became clear to me that, The expectations are particularly high when it comes to the MAP provision.
There's still a lot of work ahead of us.
We have to strike a balance.
On the one side, it is about ensuring some consistency with what countries already know and what they already use in practice.
But at the same time, um, we heard some voices expressing a desire to improving the procedure where possible, and I'm optimistic that we can find the right balance going forward.
Then what else? Yesterday, many delegations asked for leanar text.
The concern is that the text in its current form, it contains too many details and it unnecessarily, provide restrictions on the implementation, and it would not be flexible enough to take account of future developments.
Going forward, we will need to decide what is essential and what belongs in the protocol.
And what could sit elsewhere.
As for elsewhere, some possible forms were mentioned yesterday, each of which has probably pros and cons, like AAC were mentioned, Tbox, preparati, competent authority agreements, as well as guidelines.
It will be up to all of us to see where we can put some of the parts of the protocol.
Well, one final impression and maybe the most important one yesterday is that what stood out to me is the very active and very strong engagement from the membership and the stakeholders and as for the membership from all regions and from all groups.
To me, that is a proof to the relevance of our work and that there's a strong interest in the work and really much hope that we can continue building on this.
As for today, today we are going to be discussing the remaining chapters Chapter four on consultations and the absence of an applicable tax instrument.
Chapter five, reservations, and Chapter six, other provisions.
Um, we are going to take them on block.
We do not take it chapter by chapter.
It's a little bit like with respect to the time that is left to us, but also it's um, um, like take, for example, Chapter six, might be not so many interventions compared to the other chapters.
In a moment, um, The floor will be open and we have prepared again some slides with some questions that are meant only to prompt some input.
But let me quickly introduce in parallel the chapters or the provisions.
As for Chapter four.
Chapter four is it establishes a voluntary consultation process.
For identify tax issues that may result in double taxation or double non taxation where no applicable tax instrument is in force between the parties or it needs to be added where there is something in force, but the case at hand is covered by its scope.
The competent authorities may clarify the relevant facts, compare the respective administrative positions, and consider whether action may be possible under their domestic laws.
Consultations take place only if all competent authorities concerned agree to participate and taxpayer specific information may be exchanged only where there is an existing legal basis for information exchange.
What could that be? It could be a MAC, it could be the MAC.
The mutual administrative, I'm lost would have to look it up.
It could be the MAC, it could also be a tax information exchange agreement, the bilateral one.
Just to give you an example, where it could also be a regional agreement.
Or another instrument.
Any understanding that is reached under that chapter is meant to be non binding.
It does not create rights or obligations, allocate taxing rights or allows a competent authority to depart from its domestic law.
So the important distinction here is this is not a dispute resolution procedure for an existing case of double taxation.
It is a consultation mechanism concerning a tax issue that may result in double taxation or double non taxation.
So this whole chapter that reflects earlier discussions.
And in this context, I would like to refer to paragraphs 14, 16 and 18 of the Colles concept note of January 23rd this year, that was the basis for our discussion in the fourth session that formed in those paragraphs, we have laid out also the evolution of the discussions, going back to our scoping exercise summer last year.
In addition to that, I think it is also worth pointing out that the underlying concept is not entirely new to us.
I would also like to refer to the commentary on Article 25, and there you can take both the OECD model as well as the UN model.
Paragraph 55 explains that the second sentence of paragraph three.
I'm talking about Article 25, second sentence, that it allows competent authority to deal with cases of double taxation that fall outside the scope of the provisions of the treaty.
One example that is given there is an enterprise.
Or a resident of a third state with permanent establishments in both contracting states and the commentary says this could, for instance, be the case where one or both of the contracting states have no bilateral tax convention with the third state.
It is not as if we are inventing entirely new wheel or I'd say it's rather an evolution than a revolution.
What we see in front of us is the only slide for Chapter four, and the question that we had here in particular is, does the chapter provide a sufficiently clear and self contained basis for consultations when no applicable tax instrument is in force? Quick, can we kindly move to the next slide, please? Thank you.
As I said, we're going to take the chapters together.
Therefore, let's move to Chapter five.
Chapter five allows states to make reservations with respect to individual mechanisms under the protocol.
It is the same chapter that regulates the relationship between the protocol and existing bilateral or multilateral tax instruments.
Um, overlapping mechanisms, the draft currently, it contains two alternatives.
Under one approach, the mechanism under the existing instrument would generally continue to apply, and under the other, the mechanism under the protocol would generally supersede.
In both cases, the parties may agree otherwise.
It's just a question what's supposed to be the default Um, this question is closely linked to the question, what do we actually mean by a mechanism that is already included in another instrument, a mechanism considered to be substantially similar, only if it has a comparable purpose, framework, level of protection, safeguards, and legal effects that is meant to guide a little bit the response to that question, what is substantially similar and what not.
And the provision that merely allows competent authorities to consult or reach mutual agreement is not sufficiently by itself.
In our earlier discussions, there was already some direction on how to deal with existing instruments.
So how do we want to tackle this situation that there are treaties out there with dispute prevention and dispute resolution mechanisms.
Paragraph eight of this January's concept note, also looking back at earlier session, the third session in Nairubi, it states, and I quote, that's a difficult word, on operationalization and functioning, there was broad agreement that the protocol should not have an automatic superseding effect on other instruments.
It also states, the written inputs also generally supported an approach in which mechanisms would not automatically supersede other arrangements, although there was a diversity of preferences regarding the details of optionality.
Finally, paragraph 12 contained three cases and Case B then addresses the situation where mechanism already exists.
There it states, the concept node in such scenario, the corresponding core mechanism under the protocol would not have an automatic superseding effect and the parties may choose to continue relying on the mechanisms under the instrument, but the protocol's optional mechanism could, if the parties concerned agree, coexist with and complement the existing mechanism.
So so far so good.
This concept, that was laid out in the last concept note is reflected in our alternative A in Article 5 0.2 paragraph one, Chapter five, first article, paragraph one.
So after this session, after last session, a different position was introduced by a group of member states.
That approach is reflected in alternative B of Article 5 0.2, paragraph one.
So it reverses what is supposed to be the default.
The two alternatives, they remind us very much of the discussion we had on Article 21 last week, 21 of the Framework Convention.
Perhaps we are a little bit more fortunate than the guys discussing the Framework Convention because I Possibly we have the lack of having a third option.
The question is, do we really have to choose between alternative A and B? Could mechanisms under protocol instead exist with existing mechanisms under other instruments.
Could that perhaps work only for certain mechanisms? Maybe not possible for all mechanisms, but at least for some.
We should then ask, that's my recommendation whether such an approach would be legally workable? Would it support effective dispute prevention and dispute resolution or would it rather instigate and cause even more disputes? Would it create more uncertainty among tax administration and taxpayers? And by answering the question, what is interesting is that if we don't have to choose between alternative A and B, perhaps we could avoid the difficult discussion of what this meant by substantially similar or not and is it clear enough or not? Chapter five, um, Chapter five, we have also prepared one slide and we are going to ask which default approach should apply where another instrument contains a substantially similar mechanism.
Should that mechanism continue to apply alternative A or should the protocol mechanism supersede it unless the parties agree otherwise, alternative B.
The question is the proposed criteria for a substantially similar mechanism sufficiently clear? Next slide.
Just one more slide.
Chapter six.
Chapter six then deals with exchange of information and confidentiality.
Information may be exchanged only where there is a specific legal basis for doing so and where the conditions of that legal basis are met.
The protocol does not itself create an independent legal basis for the exchange of information.
Instead, the relevant tax information exchange instruments as defined in Chapter one, are applicable in the particular case, and they remain decisive.
Any information exchange remains subject to the applicable confidentiality, data protection, and the purpose limitations.
And the question here would be, are these safeguards sufficiently comprehensive and appropriately applicable across the protocol? So on that point, we are all aware that we have been discussing in the first week in the context of Article 11 provision for the exchange of information.
The protocol is to some extent agnostic in that regard.
The definition allows for the convention to provide for an exchange of information mechanism for an operative exchange of information, but it would work even without.
Instead, it would then refer to other information exchange instruments.
Now I have spoken enough.
Happy to open the floor.
Everyone is invited to intervene on Chapters four, five, and six.
Thank you.
Maurius, please.
Good morning, chair.
Good morning, co leader and colleagues.
I'm going to refer to Chapter five, co lead and specifically the alternatives mentioned under application in relation to other instruments.
When it comes to the alternatives that have been proposed here.
Now, as you rightly highlighted, there are several tests in those paragraphs.
One is the substantially similar in purpose and function.
Now, probably we'll use what we in law say what is reasonable because we are not going to dive into micro criterion to see how substantially similar the mechanism is there in the context.
Now, this is one.
However, when I look at the first one, it seems to be suggesting that you could have a mechanism which is similar in nature to leave alongside what is proposed in this protocol.
Um, but when it comes to alternative B, then we say that um, The current protocol would supersede the other instrument, whether bilateral or multilateral.
Again, to the extent that, you know, the mechanisms are substantially similar in purpose and function.
Now, when this happens, I'm asking myself a number of questions, bearing in mind that these are instruments under international law But they only makes sense when they are domesticated and when disputes arise, rights are affected the moment an action is initiated before the courts.
The question is, in the application of not only one substance, therefore, what is substantially similar.
Second and more important is the application of that provision in time.
The more so when a case has been started under regime, and the law changes while that case is on, question is, how does that impact on rights of the party whenever the case is not completed? What is for me disquiting is that when you look at the entering subparagraph three, it says that once this is in force, whether it's in force before, before or after this protocol entered into force for those parties.
The question is normally, but I don't know for otherspect before the countries, but in the common law system, we have what is called savings provisions.
So do we include a savings provision there for rights that are acquired while a case has already started? These are questions I have for which I don't have the answer right now.
Thank you, Chair.
Yeah, that's a good question.
Thank you, Mauritius, and I hope that together we will be able to come up with answers to those.
I give the floor now to Italy.
Thank you, chair.
Good morning all and let us join the voices of appreciation for the huge work you have done.
Thank you for that and for this presentation, for conducting in this bright way all this discussion of today, and we are happy to comment all together this chapter.
If I may step back just to clarify that we also favor optionality coherently with the approach we have also on Protocol one.
We think that optionality allows more inclusivity.
And it should be read with the lenses of an open mind, with the idea of getting a compromise.
We agree on the idea of converging on some core mechanism, which perhaps on the prevention is more clear for the resolution, it is more clear that it would be the MAP while it is not so clear what will be the core mechanism for the prevention.
For us, we have a strong preferences for the APA, especially on a bilateral multilateral way.
We understand that for some other countries, this is not the case.
For us, audits are not technically a prevention method, nor the cooperative compliance procedure are, but we are open to evaluate that if it is the case to get a compromise and we would like to see more openness on the resolution size as far as arbitration is concerned because we may end up in some mechanism that could be ensure more neutrality for this country that have concern on that.
Having said that and going to the matters that you are requesting to comment today, we see with favor the sui generous mechanism of consultation.
We understand that in some cases, it's just a procedural set of provision, but it's a beginning that could be useful in the case where competent authorities of some countries in a multilateral approach have no legal base for any MAP.
Again, perhaps it's not the panacea, but it's a good things that we appreciate to have in this protocol.
As for the treaty overriding question, again, coherently with our position on Protocol two, we think that the supersession of existing treaty by the protocol should be done in alternative way So existing treaty should prevail unless the parties otherwise agree, and that perhaps could be done again with an ANACS where it is clarify which couple of treaties must or also other kind of agreement could be touched by that.
We agree by the fact that the tax pains of exchange of information should be found in something that is already in place because for us, the rights of the taxpayers are very important in this respect.
We are referring especially to the privacy.
And we welcome the approach you have taken.
As for the other things, more technical things, we are quite flexible as far as timeline are concerned and other things, but we think that the whole process moves in the right direction.
Thank you.
Thank you, Italy.
Okay.
Thank you, Italy.
Just a comment on reservations overall.
So Once the intent is that once a country has indicated that they have made a reservation on any of the mechanisms, apart from the core mechanisms, of course, then another jurisdiction cannot compel or demand that they engage on that particular mechanism.
If, for example, you have reserved on arbitration, but the other state party with whom there's a dispute would want arbitration to be used.
Once there is a reservation, then that option is is off the table for that particular dispute.
The relationship.
Huh? The relationship, not only the concrete dispute.
Yeah.
All right.
Ken, you have the floor.
Thank you.
Thank you, Colleague.
Well, I'll be making my remarks on behalf of the 54 Africa member states.
And then as my Nigerian friend says, I'll remove my hat, but he has a hat, so I'll remove my coat and become a Kenyan and make my remarks on behalf of Kenya.
So I think I'll keep it short.
The African group appreciates the efforts of the colleagues and the Secretariat for preparing this draft protocol on cross upon cross border tax disputes prevention and resolution.
I'll be dealing with the two chapters, Chapter four, five and six, actually three.
On Chapter four, we have process of consultations, information exchange, and confidentiality.
The Africa group supports strong confidentiality protections and recognizes that effective information exchange depends upon robust safeguards.
However, confidentiality requirements should not create unnecessary procedural barriers that will hinder legitimate cooperation among tax administrations.
The protocol should strike a careful balance between taxpayer protection, administrative efficiency, and effective enforcement.
Special attention should also be given to ensuring that consultation processes conducted in the absence of an applicable tax instrument do not inadvertently create obligations or practices that interfere with domestic sovereignty or exe the legal basis established under domestic law.
That will be it for Chapter four comments by the Africa group.
But then I'll go to Chapter five, which has Article 51 and 52 reservations and applications in addition to other instruments.
The Africa group supports an approach under which the protocol serves as the default framework governing dispute prevention and resolution unless participating parties agree otherwise.
This approach is preferable because many existing treaty provisions reflect historical imbalances in negotiating power and do not adequately reflect contemporary principles of tax cooperation.
The Africa group recommends that the article 0N mutual agreement Pro, the map, should not be subject to any form of reservation under this protocol.
As such, the current texts of paragraph one should be redrafted to exclude the map.
The Africa group further recommends that clear guidance should be developed regarding the meaning of the phrase substantially similar in purpose and function in the article to avoid uncertainty and inconsistent interpretation.
The protocol should establish transparent criteria for determining when another mechanism should not be considered comparable.
Well, to conclude on these, we'll make our remarks, and I think this form of critical part of the protocol in general.
In overall, the protocol constitutes an important step towards a more multilateral and inclusive tax dispute prevention and dispute resolution framework.
Nevertheless, from the perspective of the African group, it requires further refinement in terms of form and substance.
So as to ensure that the mechanisms are legally sound, practical, equitable, and responsive to differing levels of administrative capacity.
A successful protocol should prioritize the following.
Number one, it should look at capacity building, and secondly, they should preserve sovereignty.
It should protect source country taxing rights, ensure inclusive and equitable representation in decision making structures, and avoid creating obligations that exceed the operational realities of African tax administrations.
These considerations will be essential if the protocol is to achieve its objective of fostering genuinely inclusive international tax cooperation.
I thank you colleagues, and I think that marks the end of the African group representation.
As for me, removing my code, I'll do it in a different timeline, so thank you so much.
Thank you, Kenya, speaking on behalf of the African group.
I'm not sure whether I understood correctly.
So if you intend to speak in national capacity, feel free to do so so you wouldn't have to raise your hand again.
Mike to Kenya, please, sir.
Well, when you speak on behalf of the Africa, 54 member states, you need to rest a bit shoulders.
Thank you.
Very good.
Understood.
Sure.
Yeah, the invitation stands.
Let's continue.
Next, Spain, please.
Thank you, facilitator.
This is the first time I'm taking the floor.
I'd like to thank you for all the work that you've done.
I thank and congratulate the co facilitators and Secretariat.
We have a few technical suggestions on the various articles to make the best use of the time allotted.
We will refer to remarks in writing that we sent on July 8th.
We would like to support the Netherlands.
We agree with what they said yesterday about the time frames that ought to be indicative in nature.
We also agree with France and its comments yesterday saying that the arbitrator could come from one of the states concerned, the national of that state.
As for Chapter five, And like other states, we think this article is not necessary.
We don't think that it is necessary to establish rules on concrete links between the mechanisms under this protocol and those that exist in other legal instruments or determine which of them ought to prevail over the other or be replaced by another.
Our experience shows that several mechanisms can coexist without any issues, and that is currently the case with the mechanisms provided for in the convention to prevent double taxation and the mechanism in the process for mutual assistance.
The Mutual Administrative Assistance Convention.
This did not create legal uncertainty on the contrary.
It allowed states to choose the mechanisms that were most adapted to the case in question.
Mechanisms can coexist and it's only when two states parties have decided to explicitly replace one mechanism by another legal instrument that we should allow for the conclusion of an agreement with this goal.
However, we believe that the protocol should not provide for the replacement of mechanisms based on some similarity.
This could lead to ambiguity as to the relevance of certain mechanisms.
Thank you.
Thank you, Spain, United Kingdom, please.
I'm trying to think of Thank you, Mr.
Co Chair.
On particularly Articles 52 and 53, and the interaction with substantially similar existing mechanisms.
To begin, we are content with the description provided as to what constitutes a substantially similar mechanism.
I think I want to echo the comments of both Italy and Spain, starting with the comments from the distinguished delegate from Spain.
We agree to an extent that mechanisms such as this can exist in parallel.
And he made the point that we have, you know, for instance, exchange of information under DTAs, exchange of information under the MAC, There may be exchange of information under various regional agreements as well, and they complement each other and don't generally create legal uncertainty or issues.
And I think that is because these are, you know, fundamentally permissive mechanisms that allow for things to be done.
I do think with dispute resolution, the situation may be slightly different when we're talking about mechanisms that confer rights onto taxpayers.
It's easy enough, I think, for states, when exercising these rights to, you know, literally pick which one they want, or, you know, from personal experience, it's, you know, you'll just tend to tick all the boxes when you're doing an exchange of information requests and use everything.
I think it's somewhat different for taxpayers.
I think taxpayers would prefer to understand exactly what it is they have the right to do and under what procedure.
So having we'll admit having having not considered it in any great detail, my immediate reaction is we probably should specify which takes priority.
And having done so, yeah, the UK supports option A.
Throughout, we've made the point that the mechanisms in this protocol should not automatically supersede existing, well understood and well functioning mechanisms.
Particularly concerned and option B requires both parties to derogate from it.
We don't think that would be workable for us, so we strongly support having to positively accede to these provisions under Article A or option A, sorry.
Thank you.
Thank you, United Kingdom, the Russian Federation, please.
Thank you for giving me the floor.
I will be talking about article Chapter 5.2, the proposed mechanism.
We believe it's excessively complicated, we would support a simplified procedure for adopting a mechanism.
If the parties want to use an existing mechanism, it doesn't need to have an assessment.
If there's mutual agreement, the parties can adopt an alternative mechanism stipulated by the protocol.
We also propose the reservation that the mechanism should be adopted if the parties did not approve existing mechanisms in effect.
We also will give the comments in writing.
Thank you.
Thank you.
Russian Federation, floor goes now to Germany.
Thank you, Chair.
We have two comments on Chapter four, starting with Article 4 0.1 P one.
If there is no applicable tax instrument in force, then there are also not specifically assigned competent authorities.
To this end, it remains a matter at the level of tax administrations.
Therefore, we suggest to use the term tax administration instead of competent authority in this article 0N Article 4 0.2 Part two, here we have a question of understanding.
Consultation should be possible in cases where no applicable tax instrument is enforced between the states concerned.
According to our understanding, these consultations should also be case specific, in other words, aim to avoid double taxation for a specific taxpayer.
This implies that the taxpayer must be identifiable.
Generally, an applicable tax instrument also includes provisions on the exchange of information.
If such a tax instrument does not exist, there is usually no other legal basis for tax related exchange of information.
Against this background, does para two fall short because it only enables exchange in anonymized form? This is our question.
And then on Chapter five, I have one question on Article 5 0.1 P one.
It is not envisaged that a reservation can be made at a later date.
We would like to find out the background to this restriction.
I thank you.
Yeah.
Thank you very much, Germany.
The first question pertaining to Chapter four, as I said earlier, there are means you can have an instrument that allows for the exchange of information without having necessarily a substantive legal basis, like you don't have a DTA, but you have a tax information exchange agreement where your signatories to the MAC.
So to answer your question.
It is not necessary to limit the exchange of information to anonymous data.
On Chapter five, it is true as it is currently designed, member states would have to make the reservations or decide on excuse me, which mechanisms they want to make use of at the time they signed the protocol.
They couldn't do that later.
That is, Well, of course, we could consider a different approach to it, but the idea is, according to the provision, it is possible to withdraw your reservation and we could end up in a situation where a country is opting in, is opting out, is opting in, is opting out.
This is also not very helpful for tax certainty.
Um, but yes, we could consider, for example, introducing a specific time frame, once you have opted in, you are not you as a country must not opt out again or withdraw the reservation for a specific period of time.
So to ensure a certain level of predictability and tech certainty.
I hope that answers the questions.
The floor goes now to Brazil.
Thank you, Mr.
Cold.
My comments on Chapter four, consultations in the absence and applicable tax instrument.
We understand that while the proposed framework provides a useful platform for dialogue between competent authorities in situations where no applicable tax instrument is enforced, its practical effectiveness will be very limited compared to its drawbacks.
The draft allows extensive consultation, exchanges of views, and even joint fact finding, yet any understanding reached is expressly non binding, does not create rights or obligations and cannot require any departure from domestic law.
As a result, the mechanism may involve significant administrative effort without providing a clear pathway for the resolution of double taxation or double non taxation.
In addition, the requirement for acceptance by all competent authorities, the absence of objective criteria for acceptance of request and the lack of any implementation mechanism may reduce the effectiveness and predictability of the process.
So from the perspective of developing countries, the proposal may create an imbalance between administrative effort and practical benefits.
Competent authority could be expected to dedicate scarce resource to consultation and fact finding process that by design, cannot generate binding outcomes, allocate taxing rights or ensure implementation of a coordinated solution.
The result The resulting burden may be particularly difficult to justify where the mechanism offers no realistic prospect of resolving the underlying double taxation or double non taxation.
Thank you.
Thank you, President.
We'll be back in a second.
Thanks for bearing with us.
So the intention behind this whole Chapter four is to provide an offer.
We don't mean to offer something that is detrimental to developing countries in particular or any countries that are lacking a treaty network.
Um, The question is, is it possible to judge for all countries or is it rather that each individual country would have to weigh the pros and cons, like the administrative burden, what is the possible benefit of using that instrument and the particular use case or the particular benefit we see and we imagine that the INC has seen it so far, and those provisions is to allow for a means of consultation, getting in touch with each other, consulting, speaking with each other and providing for a legal basis for that.
And when it says that no deviation should occur from the domestic law, that is to provide comfort and not to limit the use cases or to unnecessarily limit the scope of application of that provision.
You good? Go ahead.
Just to add to what Michael said, Claudio.
There are instances when we were conducting our research.
There are instances, in fact, Jamaica is part of a regional treaty that has this very issue where there is no MAP procedure in the treaty and what it refers to is a consultation between the tax authorities.
Um, we don't know how many other situations there are like that, but there are countries where there is no basis.
They do have cross border issues, they do have disputes, but there is no basis on which they can engage with the other state.
The intent of including Chapter 4.1 is to provide some kind of framework within which countries in that situation can reach out to the other tax authority and arising from that consultation, We can they can decide whether or not, okay, let us have a tier, or they may even decide to have a double taxation agreement.
We don't know.
The whole point is that we are just providing guidance on how you can engage one another in the circumstances where there is no existing legal instrument, and you have nothing in domestic law.
So that's that is the intent of it.
Can we open Brazil's mic, please? Thank you, Marlene, for your explanation.
But I think that when you have this provision in the protocol, it creates for the taxpayer, the specative to have some useful result.
We know that in the majority case, it will not have a solution.
Of course, that in a specific case that, to be honest here now in Brazil, we already received something from other country that want to make some consultation without this protocol.
But I think that the expectation for the taxpayer and also aligned with the burden for the tax administration that it will multiply when you have this That's my concern.
Just to share with you and the other jurisdictions.
Thank you.
Thank you.
I think it's a valid concern and we'll take it on board.
Just.
We con So thank you very much for your patience.
I give the floor now to China.
Thank you, colleagues.
Our comment is also upon Chapter five resolution, which is by the article 52 application in relation to other instruments.
Like the comment shared by the colleagues, we also don't think the mechanisms under this protocol should supersede any existing mechanism and other instruments automatically.
If we need to have some choice between alternative A and alternative B, we prefer alternative A.
However, we're also trying to figure out the scenario that whether the mechanisms substantially similar could coexist.
We're open to this course upon this b.
Thank you.
Thank you very much for your openness and discussing and possible third alternative.
France, please.
Okay.
I would like to thank the college for your work on this Protocol too and for your efforts in providing us with this proposal.
I will try to be brief.
Regarding the Chapter four.
Thank you for your previous answers.
We have also some concerns about introducing this type of article.
Nevertheless, we recognize the usefulness for some states of having a legal basis in the absence of a tax treaty, but we cannot support the implementation of such a mechanism without substantive rules.
So to better understand how this consultation mechanism would work in practice, we would like an example of the type of dispute it addresses and the legal means available to reach a solution.
In this case, we would also underline that there is still the diplomatic way if it's necessary.
Regarding the Chapter five, um, We prefer to apply the principle of optionality to the entire draft protocol and believe that the opt in mechanism is the most appropriate for this purpose.
Um Regarding the Article 5 0.2 and 5.3, as Spain said, if we have to make a choice, we strongly support option A, which provides for an opt in mechanism.
We think it's also easier for us to manage administratively an opt in mechanism and it allows choices to be made on a case by case basis without having to generally override all other instruments in force.
Um, we thank you for the definition given to the concept of mechanism substantially similar in purpose and function, but we would appreciate further clarification to ensure proper coordination between existing instruments and mechanisms provided for in the protocol.
That's all from me.
Thank you.
Thank you, France, and for the first point concerning an example for Chapter four, if I remember correctly, we discussed an example.
Must have been Nairobi, but of course we are happy to revisit that again in the next intersectional period.
Thanks.
Singapore, please.
Thank you, Colleen.
We have a few points on Chapters four and five.
On Chapter four, we note the legal impediments highlighted by several member states in previous intersectional meetings that where there is no applicable tax instrument, there is no allocation of taxing rights and accordingly, no dispute.
While we agree with this observation, we note that the absence of a dispute does not necessarily mean the absence of double taxation.
In this regard, we think this provision could play a useful role in certain instances, for example, in transfer pricing cases where both jurisdictions wish to adopt arm's length pricing in their domestic laws, but lack an applicable tax instrument to jointly develop the appropriate arm's length price.
We therefore welcome the inclusion of this provision in the protocol, which will allow member states to engage one another on a voluntary basis.
On Chapter five, we share the expressed on Chapter five, reiterate our earlier comments that optionality should be preserved to encourage participation and ensure effectiveness, and that APAs and MEP are the appropriate core mechanisms.
On Article 5 0.2, we share the views expressed by Spain, Italy, the UK, China, and France and support option A.
Existing tax related instruments are concluded after much negotiation and compromise and should be respected with any superseding requiring the consent of the parties involved.
Thank you.
Thank you, Sing.
Just to quickly reflect on one point that you made.
You were saying that not having a dispute does not necessarily mean not having double taxation.
Well, that's interesting.
I had an exchange yesterday in the corridors and that goes back to the question what constitutes cross border dispute or how are we going to define or not define dispute? Is a dispute only something that can be resolved Or is can you have a dispute that is unresolvable? You seem to be leaning towards the second interpretation, but at the same time, we have to be mindful that we all acknowledge that there are instances where we have a dispute and we go into a MP procedure, and despite all our efforts, we cannot necessarily resolve the dispute.
What is happening then? The dispute does not disappear.
So we are acknowledging that you have disputes that just can't be resolved.
And Well, yeah, when you don't have a substantive legal basis, it might be true that it is a dispute that is just unresolvable.
Very good.
Oswear please.
Okay.
Thank you, colleagues.
As it is our first intervention on Protocol two, we would like to express that we appreciate the considerable efforts by the coletes in advancing the work of workstream three and in preparing the first comprehensive and well developed draft of Protocol two.
We recognize the significant work that has gone into bringing the various proposals together and facilitating our discussions.
Austria is of the opinion that any mechanism established under this protocol should not supersede existing arrangements unless the states concerned expressively agree otherwise.
Therefore, we support the inclusion of option A as expressed in Article 52.
We would also like to emphasize that Austria already participates in a well functioning international framework for dispute prevention and dispute resolution through its extensive treaty network and under established international instrument.
From our perspective, it is therefore a fundamental importance that the protocol complements, rather than duplicates or undermines existing mechanisms that participating states already consider effective and efficient.
Thank you.
Thank you, Austria.
Ghana, please.
Good morning.
Thank you, Chair and colleagues for the opportunity once again.
I think yesterday we gave you all the congratulating messages and so I'll proceed on that same message by saying we thank you for the work done so far G aligns itself with the statement made by distinguished delegates from Kenya form on behalf of the Africa Group, and AA has been seconded by other member states.
Garner want to make this statement or these comments in our national capacity.
With respect to Article 4, that is the consultations, even though we appear to be indifferent, but in terms of legalities, reading through Article 41 to five, As dist delegates from Brazil just said, it appears that the end result is nothing really because whatever complion that will end up it will not resolve anything.
I was just thinking following from Malen's point that there could be situations where There could be a treaty but lacks a mechanism to resolve a dispute.
It means that there is a legal basis in those circumstances, but a legal basis is short or falls short of a mechanism to resolve that dispute.
So in that sense, which means that we can redraft the paragraph one to reflect that where there is no applicable instrument in force or applicable instrument lacks mechanism to resolve, then of course, in that context, there is applicable instrument, but it lacks the mechanisms of dispute resolution.
For that matter, then you bring the person into the scope to resolve that dispute.
But taking on, Michael, the issue we raised with respect to what is a dispute.
Just on, I think ordinary we all know that one of the two parties have signed on to a particular agreement, and for example, there's a DTA, as we have spoken about and somebody say, I have a taxing right and you say, I don't have a taxing right, so we have a common ground to then come there's a dispute because we have a disagreement on a common basis.
But when there is no applicable instrument.
In that regard, it becomes quite difficult.
What is why I'm proposing the governor is proposing that we can then look at it from that context to refine it so that the competent authorities of the respective states can now come to the table either through consultation or they can do any of the mechanisms, particularly map that we are seeing as a core mechanism.
So that is that on Article 4.
Chair, let me go on to the Reservations.
As succinctly stated by the distinguished delegates from Kenya, foreha Africa group, we are also in support that Once we have the map as a core mechanism, which of course is going to aligns itself 100% with that, then the paragraph one should be redrafted to exclude map article from being reserved.
I make this point because, Michael, I think in your submission, you made a point that you don't want a situation where we have dispute resolution protocol and people just opt in, opt out, opt in and opt out.
Then at the end of the day, what are we having here? The reason why we've gathered here is to ensure that we resolve disputes that are arising from cross border tax matters, and that's the reason why this protocol has been given birth.
If we cannot have a core mechanism to deal with it and we allow member states to make reservations as when they wish, then of course, the whole protocol is of no essence to us.
So that is why we strongly support that the MAP become a core and non subject to any form of reservation.
Now, the issue with respect to that leads me to the issue of relationship with other instruments.
Ghana strongly aligned itself with the Africa group position in choosing option B.
And with further refinement of that text to take away the issues of reservation in the last line or last two lines, paragraph in that text so that we can have a mechanism to resolve disputes that is, I mean, emanating from cross border matters.
The reason being that that's why we are here.
So if we don't do that and allow member states to do options and allow existing mechanisms that we have all to a large extent.
If you read the issue note, member states have critiqued the existing frameworks, and that's what gave birth to this protocol.
And so it will be appropriate for us to have it as the default rule, and of course, will give room for transitions, which I think has been, um made available within the text that is under Article 5, where there's existing mechanism trying to replace, then there is already in place disputes mechanism ongoing under a particular framework.
We give a transitional provision for those dispute to continue under the old framework until the time that the dispute is resolved under those frameworks.
I so submit, Chair.
Thank you.
Thank you very much, Garner.
We now move on to Switzerland.
Thank you, Madam Colleague.
I had a couple of remarks regarding Article 51 and 52.
Just a question for reservations because Michael had also mentioned the numeration here.
Are we to understand that we're going to have five reservations possible in part two and three and two in part three, is that already giving us direction on the number of reservations or is this kind of a random list that we could add to or subtract to.
Then that's my question.
My remark is regarding option A or option B.
Not surprisingly, we strongly are for option A.
I'm wondering if there's a huge difference between the two options because it seems to me that in both situations, option A or option B, the default rule is there's no superseding.
Since in option B, if there's a reservation, then we go back to superseding.
Do we really need option B here because both options need the agreement of both countries to have a superseding and if they both agree to it, then the superseding rule is in effect.
But if only one of them wants superseding rule, both in option A and an option B, we'd have the situation where the mechanisms that are in place do prevail over the provisions of the treaty.
I answering your first question, Switzerland, in previous INC discussions, there was support for having a core mechanism for the prevention of tax dispute and having a core mechanism for the resolution of tax dispute, despite the overall concept of optionality, which means that when you take all the mechanisms in total, we have six preventive mechanisms and three resolution mechanisms.
It will mean that at a maximum, you could preserve on, um Five preventive mechanisms and two resolution mechanisms.
You're probably right that the question whether the protocol is going to have a superseding effect or not superseding effect is particularly relevant when it comes to the core mechanism because all the other mechanism of member state would not want to have a superseding effect, it just would not need to opt in.
But at the same time, it would be unfortunate because could want to utilize that optional mechanism vis-à-vis some other signatories with which there is no other mechanism already in place.
But, in particular when it comes to the core mechanism there it is decisive.
Did that help? No.
Go ahead.
Mic to Switzerland, please.
Can we open here we can.
Howdy.
Now.
Yes, that's very clear and that's helpful.
Actually, I was because my next remark I was seeing reservation as reservation regarding paragraph 51 Because if you look at option B, it says, has made a reservation in accordance.
Yeah.
I'm sorry.
I thought reservation was a reservation on the fact on 52, which you can't make a reservation on.
I understand.
It is true that option A is not exactly the same as option B, and I understand Um, I understand that we need at least one core mechanism in the different parts.
Does that mean we're going to have that many optionality? Have we already decided the number of optional, we're going to only have one core mechanism or can we have more core mechanisms? I was just wondering where we are in the process of our reflection.
Well, very good.
We haven't decided anything yet, but we have discussed a lot and according to those discussions, there's appetite for having one core mechanism for resolution, one mechanism for prevention, at least.
I deem it very unlikely that we will identify true preventive mechanism as being core.
Thank you.
Next, we have Les Otho.
Thank you, colleague and good morning.
The Alliance itself to the position advanced by the ACA Group SSS provided by Kenya.
We just want to indicate that I We are one of those states that we're looking forward to seeing the provisions that we see in Chapter four, Article 4, because we have a limited treaty network and we don't intend or it's not possible for us to extend that treaty network.
But while that is the case, the trade relations and economic relations extend way below below the treaty network that we have.
We currently have practical situations whereby taxpayers are upset such and such a jurisdiction is refusing to recognize the withholding tax that is charged and we have not had any recourse to what we can do.
In some other instances, we have relied on a forum like this one to actually start to engage.
For us, it's a welcome remark.
We understand the logic behind that because what it says is that you can only do what your domestic law allows in terms of the secrecy provisions that we have in terms of having to resolve or assist the taxpayer.
That is the logic that we read in Article 4.
I think to make sure that in practice it works because member states raised issues of whether technically there would be a competent authority for such instances because there are no legal instruments in place.
I would say for practical purposes, it can work.
Maybe one of the things that we can do is to have a list of competent authorities for purposes of the protocols on other instruments at the UN level.
Otherwise, it's always easy to actually go into your website and find as to who the competent authorities are.
That being the case, it gives the safeguards that you don't just send the letter to the tax administration.
In short, I'm trying to say it is still possible to actually have a look as to who is who is the competent authority for other teams that we are not part of and then be able to send that, and then you are almost sure that the person would actually do all the necessary safeguards that are required.
We don't necessarily need to have to change the wording or reference to competent authority in the draft provision that we have.
Otherwise, I think this is a very welcome remedy for us.
Thank you, Chair.
Thank you, Lesto We next move on to Zambia Good morning.
Good morning.
Thank you for the floor.
Zambia supports the position advanced by Kenya on behalf of the African group.
In terms of Chapter 441 under paragraph three, we acknowledge the safeguard with consultations being triggered by consensus once the competent authorities involved all accept.
We also acknowledge the fact that the process will be driven by the competent authorities who will agree on the modalities and the scope.
In terms of Chapter five, we echo what was submitted on behalf of the African group and state that there should be no reservation to the map, which in our view we submitted yesterday should be the core mechanism for dispute resolution.
In terms of Article 52, we support option B, which was also supported by the African group and several countries which have spoken.
Thank you.
Thank you very much, Zambo.
Next, we have Morocco.
Good morning.
Thank you very much for the document provided and for the presentation.
First of all, Morocco Alliance fully supports the statements presented by Kenya on behalf of the African group.
We would like to highlight three issues.
The first thing is to say that we agree and we share the concern expressed by Brazil about the procedure of consultations because, As we said earlier, from our viewpoint, we think that this protocol should and should address only cross border tax disputes.
It leads us to the interesting question, what is cross border tax dispute? In our understanding, we might have cross border situations like two countries each applying domestic law could lead to a cross border situation where there is double taxation, but there is no common an instrument to solve it.
Here it's cross border situation, but it's not a dispute.
As expressed by the distinguished colleague from Ghana, to have a dispute, we need a common legal instrument.
The two parties do not share the same interpretation or have divergent way of implementing the legal framework.
In this case, we think that if we don't have that legal instrument, that legal instrument, so each country should be able to apply its domestic law, but there is no dispute.
And even if we come to have a consultation on that situation to try to avoid it, there is no legal basis for at least for us, if we are party to the consultation, there is no way to depart from our domestic law to find a solution.
So that the solution would remain unless we have other guidance on that.
The second point is about the uh The relation with other instruments.
Here we have rules that discuss the relation with the tax related instruments.
But we know that we have other instruments which are not tax related instruments as they are defined in the protocol.
Like investment agreements that in some cases provide for different dispute resolution mechanisms, say, for any disputes between the two states, this is the way to address it.
They include also even tax disputes.
And we know that this kind of agreements are not tax related instruments.
I remember that there is a work that was undertaken by the um UN Tax Committee about the interaction between the tax treaties and investment treaties.
I think it is important and it is worthwhile trying to address the interaction between this protocol and those instruments.
The last issue I wanted to discuss is the fact that we don't see in the final provisions about the amendment, for instance, of the protocol because in our understanding this protocol would be open for signing, I think, maybe.
How should we expect to have additional articles to that protocol, just to define ways if we need to amend, for instance, this protocol.
Thank you very much.
Thank you, Morocco, for your very good remarks and questions as for other provisions.
There are final provisions that we would need to be added to the draft.
Then I also wanted to come back quickly on what you just said about ISDS and investment agreements.
Yeah.
Occasionally, more than just occasionally.
They are being applied in tax related matters.
That was something that was mentioned yesterday occasionally by some of the delegations.
I think Given given the current definition of what is supposed to be substantially substantially similar, I would assume that it would be quite a stretch to consider investment dispute settlement provision and investment agreement as being substantially similar because it is about, Do they in terms of objective, do they provide a comparable framework? Do they come with the same level of protection, safeguards, and legal effect for achieving that objective? I would say no.
But of course, it's not just to me, you know, to make that judgment, but for the time being, I wouldn't say so.
I don't know whether that gives a level of comfort or not, but at least that is my reading of the text.
Can we get the floor to Morocco, please? Yes.
Thank you for the explanation.
So I cannot reply right away.
I just need to go back to the text and read it on the basis of your explanation and maybe discuss it in another occasion.
Thank you.
Well, of course, I'm happy to discuss.
I also didn't mean to confront you with a follow up question.
It was just meant to be a reaction and the clarification.
Thank you.
Okay.
Thank you.
Morocco.
And now we have Japan.
Thank you, colleague.
We would like to echo the statement made by the Italy and the United Kingdom and others.
We also support option A, which would allow existing mechanisms to continue to apply.
At the same time, but we thought it might be useful to provide a mechanism through which the relevant competent authorities can reach a common understanding as to whether a particular mechanism should be considered substantially similar to help provide greater certainty for both taxpayers and tax administrations.
Thank you.
Thank you very much, Japan.
We know how Netherlands, please.
Thank you, co lead for this.
On Chapter four, we do see merit in this provision, and it provides, in our view, sufficient safeguards in practice to apply or not apply it because it's a country driven procedure.
So if a country does not want to engage in the procedure, it will not take place and it's not a taxpayer initiated procedure as such.
And we can identify some cases where this can be a helpful instrument where there's no tax treaty in force.
For example, on the question if there's a PE or not, it would be helpful to have a factual exchange of positions and facts and circumstances so you could be able to solve a case without having an agreement between two states.
And we do echo the comment made by Germany on the fact that it's not the competent authorities per se that need to do this, but more tax administration driven.
Secondly, on Chapter five, we echo also the comments made by the distinguished delegate from the United Kingdom on this part, but in principle, we also would support alternative EA, although we have some questions in terms of what is substantially similar has been raised by audit delegates as well.
For us, it's not entirely clear what is meant by the clarification given in paragraph three of Article 5 0.2, I would assume.
For example, level of protection, safeguards, and legal effects.
What is meant by this is it meant to say that if you have a MAP provision that is modeled after the OCD or UN model provision that is substantially similar and then there would not be a superseding effect.
It would be helpful to get some clarifications on that point.
But if we consider them on an overall basis, we think that only the MAP and potentially arbitration provisions are the one mechanism that have been foreseen in tax treaties and any of the prevention mechanism are generally not available yet, so there would not be a superseding effect, but it would be a new provision to be introduced.
In terms of, a coexistence, we see some difficulties that has been raised by other delegates as well as to the persons that have to apply these, especially taxpayers that do not personally be aware of which provision applies at what time in place.
So it would be helpful, I think, not to have a coexistence, even though it has been mentioned that in other examples, there can be coexistence.
For the dispute prevention resolution mechanism, it would be helpful to have more clarity and it brings us to a question in this regard.
Maybe it's too soon to raise the question, but we thought it would be helpful to have an understanding on this, how this would be monitor this may be a too big word, but how would this be in practice be seen? Would that become a publication of list where this affect would be made clear or has it to be determined on a case by case basis with the protocol in hand.
We believe that it would be helpful to some extent that you could identify in a very easy way which of the protocol mechanisms apply for certain country or Sordi treaty relations.
Thank you very much.
Thank you very much, Netherlands.
Next, we have Algerio Madam President.
Thank you Co chair.
We also thank you, Secretariat, for all of the details provided and the various approaches presented to resolve disputes.
With regard to Article 4, In the reading of this article, it's left up to each competent authority of each state to have complete discretion to accept or refuse the request for consultation without criteria for this preliminary assessment.
That means that any request, even if it is insufficiently justified, needs to still be addressed, analyzed, and decided upon, and that requires administrative time from the very beginning of the review of the request.
Therefore, we echo the statements made by the African group and the African states, as well as Brazil, which raised a concern regarding this mechanism.
In the case of African tax administrations, they may be forced to dedicate a great deal of time and resources to these consultations without having the appropriate legal resources to be able to gather all the relevant information.
This mechanism could require significant investment in terms of data collection, technical exchanges, and meetings for a non binding and non guaranteed outcome.
Therefore, we believe that the cost benefit analysis might not be favorable for a administration with limited resources because it needs to spend time and expertise on a result that may not provide any legal security.
But we do believe that we are concerned with regard to consultations in this protocol because there is no possible reservation or option when it comes to using this process from the beginning.
As per Chapter five, the mechanism of Article 5, this mechanism is supposed to serve as a basis for dispute resolution.
And lastly, the efforts in the protocol to provide for a structured mechanism for a harmonized application to effectively prevent conflict.
We believe this protocol ought to serve as a basic framework for conflict dispute prevention and resolution.
Thank you.
Thank you very much.
For those remarks, Algeia.
Now we move on to Israel, please.
Thank you, Chair.
We echo Italy, Austria, UK, China, Swiss, Netherlands and all.
We don't think the mechanism in this protocol should supersede the existing mechanisms.
We see it as an option in cases when we don't have any other tax related mechanism available, so it's option A.
Thank you.
Thank you.
Thank you very much, Israel.
Finland, please.
Thank you, colleague and thank you, colleagues for all the work done with this protocol.
First, it's very much appreciated that the draft presents alternative use as options.
We would hope that this would be done in other workstreams as well.
As regards Article 5 0.2, we would like to express support for option A, although we do have questions on what is substantial similar, but maybe further work with explanatory notes could be helpful for these purposes as well.
Thank you.
Thank you.
Finland, Denmark, please.
Thank you for giving me the floor.
As this is the first time we speak on this protocol, I want to take the opportunity to express our gratitude to all the work done also on this protocol.
Prevention and resolution of tax dispute is, from our perspective, a key element of international tax cooperation, and we therefore support the work done in this workstream.
For the question on the legal grounds regarding exchange of information, we share a sentiment expressed by our Italian colleagues and we align ourselves with that intervention.
For the question regarding Article 52, we have a preference for option A, and hence we align ourselves with many colleagues that have spoken before, including Italy, Spain, France, Japan, China, Austria, just to mention a Kabul.
Thank you.
Thank you.
Thank you, Denmark, Nigeria, please.
Thank you, Madam Colleague, greetings to you.
And thank you also for the good work that you have been doing since the commencement of this protocol.
First, I want to say that Nigeria as with the position of the African group has been expressed, and we also want to make the following further intervention in the national capacity.
Taking it from Chapter four, consultation in the absence of an applicable tax instrument.
We've been so patient to listen to our colleagues and I agree with those that said that we need to go back to the drawing board to ask ourselves, what exactly is the objective? What do we intend to achieve? College, I believe, our purpose is to develop a protocol that will preserve and resolve cross border disputes.
And if that were the case and if that is the case, then it is important that we first determine whether there's going to be across the border dispute when there is no applicable tax instrument.
I've listened to the example that was given by the Kingdom of Netherlands, and without an applicable tax instrument, you will be doing that argument based on the respective domestic laws of the parties concerned.
I doubt if I will be able to convince you or convince any other state party based on the provision of your domestic law.
So if I'm not able to do that, then we'll do a lot of merit goning.
Under the provisions of the MAP, when there is an applicable tax agreement, we all agree how long it takes to even reach an agreement if you are able to reach one.
Most instances you agree to disagree.
Resources that will be required are so intense, are so enormous, for us as a country, therefore, if nothing is broken, we don't believe we shall fix it.
And that wise, we do not see any merit in this article at all, and I know that has been confir by majority of other colleagues, including Brazil, that's raised the issue.
On the reservations, Thank you for the two options, option A and option B.
And the phrase when they are substantially similar, I think that is the phrase, if I don't mess it up.
And that will take us to definition to begin to now define what makes it substantially similar and what makes the mechanism not to be.
And assuming we take it that they are substantially similar.
It therefore means whichever one that I choose will do the same thing.
But we know they cannot in all terms and purposes.
The current rules have a certain imbalances that are being addressed.
And what I know, everyone preferred a newer thing.
Why don't we go for a newer fashion that we are developing? So as a country, we therefore fee for option B.
And also in that option B, I observed the last sentence and I recall that a distingu delegator raised that.
The last sentence, unless a party has made a reservation, I think it was Canada raised it in accordance with Article V one, or those party agree in accordance with Article V three.
That last sentence, we do not see any merit in it again, and we will propose that we should take it off from that.
Further investigation is that the distraction mechanism ensure that parties to the protocol can indicate their preferences and limitation when they are signing the protocol.
So this has preserved the principle of optionality.
In our view, option B is the most realistic choice, as I've tried to explain.
Imbalances of the all treaties will be addressed, and we know that this is not really easy to renegotiate those treaties.
I thank you so much, Madam Colleague.
Okay.
Thank you very much, Nigero.
Senegal, please.
Thank you, Madam co facilitator.
Good morning, everyone.
Sengo echoes the comments by the African group delivered by Ghana.
In our national capacity, we would like to make a number of observations, especially with regard to Article 4 on exchange of information and confidentiality.
Why are we exchanging information under this protocol? We're doing so in order to best resolve through mutual agreement trans boundary disputes that could arise out of this protocol, whether these are disputes linked to double taxation or a dispute linked to different interpretations of a provision or provisions of the law.
What does this mean? This means that there is a legal and binding instrument that exists And if you didn't develop this instrument, you would not be able to resolve double taxation or have any kind of misinterpretation because it wouldn't have any instrument that we have in common.
In this situation, it would be domestic law that applied.
So I think that we need to understand that the very existence of the mutual agreement procedure is based upon an instrument.
In the absence of an instrument, we would not be able to have a mutual agreement.
That's the first point.
And that is why I have questions about the relevance of paragraph two.
Where if the conditions on paragraph one are not met, then we turn to a negotiation and sharing of the anonymized information.
Even if you share this information to resolve that dispute, that would be a different problem, which is why it would be useful to revise this provision to make it more in line with certain standards in the area.
What could be used as an alternative and which would require further development would be to consider the protocol as a legal instrument.
At that time, we would be able to resolve these issues.
With regard to reservations, I don't want to dwell on that for too long, but I am in full agreement with the comments by Nigeria on the notions that have to be clarified and on alternative B, which we think is the most realistic option.
Thank you.
Thank you, Senegal.
India, please.
Thank you, Madam Colit.
On the issue of application in relation to the other instruments, we believe that the dispute prevention and resolution mechanisms available under existing tax instruments should continue to operate in parallel with those provided under the protocol, subject to the preferences exercised by the state parties.
We recognize that the core mechanisms as well as any optional mechanisms adopted through the protocol may involve procedural aspects that differ from those prescribed under existing bilateral agreements.
In such circumstances, we believe that the procedures under the existing arrangement should be permitted to continue alongside those established under the protocol.
This may, however, result in different approaches to dispute prevention and resolution being available with the same member state under the DTA on the one hand and under the protocol on the other hand.
At the same time where such parallel application is permitted, an important question arises regarding the status and santity of a mechanism specifically negotiated and incorporated into the protocol.
If the protocol mechanism could effectively displaced whenever an alternative mechanism is available under an existing bilateral agreement, this could undermine the purpose and legal significance of the mechanism that the member states have expressly agreed upon through the protocol.
The experience with the MAC vis-à-vis the bilateral tax agreements may be relevant in this context.
In our experience, these instruments operate largely within the competent authority to competent authority framework.
Accordingly, where mechanisms coexist, the competent authorities are to make an informed choice as to which mechanism should be applied depending upon the circumstances of the particular case.
Such choices can be made based on certain objective consideration without necessarily creating an opportunity for strategic selection by taxpayers.
However, where the taxpayers are directly able to choose between alternative dispute prevention or resolution mechanisms, the consideration may be different.
There could be a possibility of taxpayers selectively invoking the mechanisms that offer greater procedural or substantial advantages.
Therefore, while allowing existing arrangements to continue in parallel may be appropriate, the framework should ensure that such coexistence does not inadvertently dilute this entity of mechanisms specifically negotiated and agreed upon under the protocol or create opportunities for strategic selection of mechanisms by the taxpayers.
In this regard, it is important that more clarity is brought to the provisions of paragraph four of Article 5 0.2, which presently describes substantially similar in purpose and function based on very broad parameters with comparable framework, level of protection, safeguards, and legal effects.
More clarity on these parameters would be really helpful in maintaining the balanced approach.
Thank you.
Thank you, India.
Li and sign, please.
Thank you very much, colleague.
I would like to echo the statements of Italy, Austria, UK, Switzerland, Israel, and others.
If both states agree that a well functioning instrument is already in place, this instrument should not be superseded by another instrument.
Therefore, we would like to indicate our support for option A, and also as has been mentioned by Netherlands but also by others, we would appreciate further clarification regarding what a similar mechanism is.
Thank you very much.
Thank you.
Ireland, please.
Thank you, Madam Colete.
A short intervention just to say that on Chapter five, Article 2, we prefer alternative A and on the other chapters, we'll follow up with written comments.
Thanks.
Thank you.
Portugal.
Thank you.
My intervention will also be short just to say that regarding Article 52, we support option A.
Thank you.
Okay.
United Arab Emirs, please go ahead.
Thank you, Cole.
This will also be short just to echo the sentiments of the last two interventions that we also support option A as well.
Thank you.
Okay.
Poland, please.
Thank you very much, Mr.
Colt.
Just a short position, we support option A.
Thank you very much.
Tanzania, please.
Thank you, Colt.
The Republic of Tanzania aligns with the African group statement delivered by Kenya and which are the African delegation have expressed a similar concern.
On Chapter four colleges, the absence of the applicable tax instruments may create legal and practical uncertainties where there is no agreed instrument governing the allocation of taxing rights.
It may be difficult for the competent authorities to resolve their differences from conflicting domestic laws provisions.
We therefore support the proposal to be removed.
On Chapter five, colleagues, Tanzania supports alternative B.
That's it.
Thank you, colleagues.
Thank you, Tanzania.
I'm just giving some time if there are any other member states that wish to make an intervention before we move to civil society.
Thank you.
I see Malta and then to be followed by Burkina Faso.
Thank you very much, colleagues.
As this is the first time we are taking the floor on Protocol two, we would like to thank you for the work done on the draft.
On Chapter five and Article 5 0.2, Malta supports effective dispute prevention and resolution mechanisms.
However, any such mechanisms should be clearly aligned with existing treaty frameworks, should respect domestic legal and constitutional requirements, and should not create binding obligations for a party unless that party has expressly accepted them.
I thank you.
Thank you very much, Malta, and now Burkina Faso.
President.
Thank you, Madam Cole.
Burkina Faso aligns itself with the position expressed by the African group, which was expressed by Nigeria.
We also agree with what Nigeria, Morocco, Lesotho, Senegal have said in addition to Brazil, India, and several other countries.
We're in favor of option B, and we support the idea of the mechanisms criteria being further clarified so that we avoid any misinterpretation that would render the scope of the provision difficult to understand.
Thank you.
Thank you.
Estonia, please.
Thank you, Madam Colleague.
Just a short intervention to support option A in Article 52.
Thank you.
Thank you.
We're now moving to civil society B.
Thank you, Cold.
My comment is on Article 51.
The state gets rights to make a reservation at the time of signature and the state is allowed to withdraw the reservation at a subsequent stage.
However, the article does not allow the state to make a reservation at a future date.
It is possible that the state does not make a reservation at the time of signature, but based on its experience for a couple of years, the state is not happy with a particular mechanism and wants to stop applying such a mechanism.
Article 5 does not allow reservation at a subsequent stage in such situations.
The question is, at a policy level, should a state be allowed to make a reservation at a subsequent stage, which means to stop applying a particular mechanism at a future date.
Now, it was stated that frequent opt in and opt outs will not be desirable, but if an option to opt out is not kept open, a state may hesitate to opt in to begin with.
Accordingly, a desirable policy could be to allow the states to review its policy decisions, at least as regards to non core mechanisms two years after opting in and every five years thereafter.
This will give desired certainty and stability to the regime and will also ensure that the state is not stuck with the mechanism which it doesn't like.
If this policy is desirable, paragraph one of Article 5 may be amended.
The revised text could be a state may, at the time of ratification, acceptance, approval, accession, or thereafter reserve the right not to apply, and the balanced statement will continue.
Thank you.
Thank you very much.
We now move to IBDT.
I'm using that because if I attempt to translate, let me make an attempt.
This would be the Instituto Brasileiro De Di Reto Tributario.
I hope from that, you know who you are, IBD piece.
I'm I'm sorry I'm butchering the Portuguese is our civil society group they're no longer here? Or was it the translation or the attempt to identify them that scared them away.
All right.
Okay.
All right.
So we're not nobody is responding.
So let us move on to DMU and Foundation, please.
Thank you for the floor.
The financing for development constituency for Children youth of the major Group Children youth and the DMUN Foundation welcomes Chapter four, Article 4 0.1 as a practical framework for consultations where no applicable tax instrument is enforced between the parties concerned.
This mechanism may be particularly useful for jurisdictions with limited treaty networks while preserving the authority of each party under domestic law.
Paragraph one establishes a balanced scope by addressing both double taxation and double non taxation.
The provision appropriately limits the appropriate of consultation to clarifying facts, comparing administrative positions and considering whether relief or other action is available under their respective domestic laws.
It therefore does not create taxing rights where require a party to provide relief unavailable under its law or operate as a substitute for a tax treaty.
The reference to an identified tax issue provides an appropriate thold for initiating and consultations.
In technical terms, the issue should have a su concrete connection with each party concerned.
Such as the treatment of the same income transaction entity or taxable event.
This helps distinguish case specific consultations from general discussions on tax policy.
Paragraphs 2 and 3 appropriately ensures that requested competent authorities receive sufficient information to assess a matter and that participation remains voluntary.
Any identifying information should be reasonably necessary and proportionate, handled in accordance with applicable confidentiality requirements and requested with due regard to different legal mandates and administrative capacities.
Paragraph four provides an important procedural safeguard by requiring prior agreement on the scope and practical modalities.
Such agreement can clarify the participating authorities issued covered timetable, channels of communication, treatment of confidential information, and any arrangements for engagement with affected taxpayers.
We encourage competent authorities to record the agreed scope timetable communication channels, treatment of confidential information.
Paragraph five permits the exchange of views, clarification of facts, and joint fact finding.
These functions should remain within legal powers of each participating authority.
Any exchange of taxpayer information would require an applicable legal basis and would remain subject to relevant confidentiality.
Data protection and permitted use requirements.
Joint fact finding should likewise respect territorial jurisdiction and domestic procedural safeguards.
Paragraph six correctly confirms the non binding character of any understanding reach.
This is particularly important in the absence of an applicable tax instrument.
The provision preserves each party's domestic tax authority and prevents the consultations from creating treaty like obligations by implication.
Any record of the consultation should distinguish clearly between agreed facts, administrative views, and unresolved issues.
At the same time, an understanding may still have practical value of identifying agreed facts.
Areas of convergence and matters that remain unresolved.
Clearly, recording these elements can support consistent domestic consideration without determining tax liability or producing administrative and judicial remedies.
Overall, the article establishes a technically balanced mechanism for dialogue in non treaty situations.
It may assist in addressing cross border tax outcomes while respecting consent, domestic law, territorial sovereignty, and the independent taxing rights of all participating parties.
We thank you.
Thank you.
We now have AF, please.
Thank you very much, colleagues and good day everyone.
We make the submission here to first and foremost, align this submission to the comments already made by Kenya on behalf of the African group, and of course, supported by a couple of other African countries.
So just a brief comments to reinstate those submissions.
One, on the first chapter in relation to consultations.
Whereas the provision tried to provide some flexibility on how that will work in practice, we have a significant concern on the lack of legal basis upon which such consultations would be based.
In our previous submissions, we did give a couple of examples where this will be clearly frustrated.
And I want just to reiterate those.
For example, whereas many jurisdictions would have arm's length standard reflected in their domestic laws, there are a couple of nuances in terms of the scopes and scope of those provisions that would be reflected in the domestic law.
For example, there will be preference on certain methodologies or maybe, uh, source of comparables and in relation to the permanent establishment, the definition could actually be different from one country to the other, and even more deeper, how profits will be attributed in those PEs.
So in case of a concentration that is premised on those significant differences, we struggle to see how you end up even having a solution out of it.
Because those consultation are intended to be non binding as we see it, and what it does for low capacity jurisdiction in terms of the resource space, then it takes away valuable resources in engaging in those type of consultations which actually don't end up resolving anything due to limitation on the existing domestic law.
So our preference, as members have already indicated, we don't support having this chapter.
On the issue of reservation, we also want to support the comments made earlier by Kenya, of course, supported by others.
It's very important that the core mechanism is not open for any reservation that will relate to the map.
And then in terms of Article 5 0.2, we strongly support option B, which is really intended to address the problems and the gaps that exist within the current mechanism.
If that is the end goal, so it's good to take that option that seeks to address those challenges.
Thanks.
Thank you, India, sorry, ATF.
And now we have the Institute of Development Studies.
Thank you very much.
Cole for the floor.
I wanted to reflect briefly on Chapter four, the consultation mechanism.
I think the concern that this may lead to administrative burden without much benefit is valid and the protocol should certainly not lead to excessive costs for jurisdictions.
Nevertheless, um, I do see the potential of that to provide benefit in certain cases, for example, where there are currently many domestic laws of countries that make reference to domestic laws of other countries, for example, in provisions on unilateral elimination of double taxation, for instance, make reference to if a certain tax is an income tax or is not an income tax, Or, yeah, there are certainly other instances like sometimes rules that provide for heavy or more heavy taxation in case the other jurisdiction has preferential regimes, circumstances like that.
I think one can find many examples.
And the domestic law of the other country is then interpreted by one country, um, And this interpretation might perhaps not be accurate, and the other country could raise or point out to the other country that the interpretation is perhaps wrong.
And in that sense, there might be scope for finding some kind of agreement in the consultation.
Um, that said, as I mentioned at the beginning, the cost should not be underestimated.
So it might be appropriate to allow a reservation for that chapter just as an idea for how to go forward with this.
Thanks.
Thank you very much, ideas.
I don't see anybody else asking for the floor.
Um All right.
So I'm not seeing anymore anybody raising their flag or their microphone for the floor.
We just want to say thank you very much for the engagement over the past 1.5 days.
Niger, please.
Thank you.
I wanted to support what Nigeria said on behalf of the African group.
I also wanted to express our support for option B.
Thank you.
Going once.
Now I can extend gratitude to all of you who have engaged.
I think we had some really good discussions.
They were rich in substance and has given us a lot of food for thought.
Of course, we will reflect more on these u in the works meetings.
And just to remind you that for Protocol two, the deadline for written inputs is August 24th, and so we look forward to your inputs there as well.
At this point, apart from thanking you, I also want to say a special thanks to the Secretariat, which I said before, but there cannot be enough to say about the tremendous support that we have gotten from the Secretariat, from you, Ray, and of course, I'm always digging up my colleague, Michael, for the way in which we continue to work and the spirit in which we continue to work.
At this point, I will hand over to Ray to take us home.
Okay.
Thank you, Marlene.
Thank you, Michael.
By this, I think we reached the end of this session and we discussed Workstream, the convention Workstream protocol one and Workstream three Protocol two and here we reach the end of this session, we can introduce that all your inputs, all your thoughts is very well taken from our side and it will be the material in which you're going to use to update the versions heading to Nairobi session.
So in the hope that we'll be able to provide better versions as we go forward and to see what all expect in the upcoming versions.
At this moment, I would like to close the informal meeting to convert it to a formal meeting in order to make the closing of this session.
The second preliminary meeting of the committee is called to order.
So now I'm going to give my closing remarks.
Excellency, distinguished delegates, dear colleagues.
As we bring this fifth session to close, allow me to begin by expressing my sincere appreciation to the constructive inputs offered throughout our discussions.
At the opening of this session, I noted that we had reached an important new stage in our work.
For the first time, the committee had before it draft tickets for the Framework Convention and both early protocols.
Our task was there no longer primarily to discuss concepts or possible approaches in the abstract, but to test those approaches against concrete provisions and to provide the code leads with the direction needed to take the nest to take the text forward.
I believe we have done that across all three workstreams.
Engagement with the chest was significant.
We hear where there is emerging convergences and where provisions require clarification or further development.
Just as importantly, many interventions moved beyond identifying concerns and offered alternatives and possible ways of addressing them.
That is precisely the kind of engagement that will allow us to progressively narrow differences as the negotiations advance.
Let me also outline the general path ahead.
The deadline for written inputs is 21st of August for Protocol two, 22nd of August for Protocol one, and 28th of August for the framework convention.
The objective should not be simply to repeat the positions expressed during this session.
Written inputs should help us move closer to revised texts, either for encourage whatever possible to identify the specific provision concerned explains the issue that should be addressed and where appropriate proposed drafting or an alternative or an alternative approach.
Following the deadlines for written inputs later this month, workstream meetings will resume during the intersectional period.
Those meetings will be used selectively to address issues where additional discussion can assist the preparation of the next text.
The frequency and focus do not need to be identical across the three workstreams.
They should respond to the needs of each ticket and to the issues identified during this session and through the written submissions.
The sixth session of the committee will take place in Nairobi.
This session is expected to focus primarily on the first version of the Framework Convention and of Protocol two, both of which will be circulated by mid November, at least two weeks before the start of the sixth session.
This will give the committee the opportunity to assess how the Coles have reflected the views expressed by the member states during this first session and during the intersectional period.
Our work will continue to narrow down the issues that remain open in both an estimates.
Following Zairobission, we will have a very narrow window to revise the texts before we convene again in January in New York.
Consequently, the discussions in Nairobi and inputs that follow will form the basis for the revised texts to be presented in New York.
I would like to remind everyone that January session will mark the final stage to submit written inputs regarding the revised texts of the instruments.
After these submissions and as the negotiations progress, we will transition to the next and final phase of the negotiations.
In this phase, the focus will be on resolving the differences between their views and between the views expressed by the delegations during that phase.
New full text suggestions will be considered other than textual suggestions that are confirmed in the room or during the intersectional period to preach differences between the different views.
Excellences.
The months ahead will require considerable work from all of us.
But the progress made during this session gives us a solid foundation.
If we use the intersectional period effectively, we can arrive in Nairobi and then in New York ready to make further substantive progress.
Before closing, let me once again thank the co leads for their steady leadership, Secretariat, for its tireless support, all delegations for the spirit of inclusivity, respect, and partnership that continues to define this process.
And stakeholders for their valuable contributions.
I would also like to express my gratitude to the interpreters for facilitating our deliberations.
I wish you all a safe return and a productive interstitional period.
I look forward to reconvene in Nairobi with a revised framework convention that reflects the work we have done here and thereafter in New York as we continue advancing the three instruments toward texts capable of receiving broad support.
Thank you all, and I would like to hand over to miss Cherry, the Director of DSA for closing notes.
Over to you.
Thank you.
Thank you, Chair.
I'm honored to deliver these closing remarks on behalf of you and DSA as the Secretariat at the conclusion of the fifth session of the intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Corporation.
Over the past two weeks, your work has advanced significantly, as you know.
For the first time, the committee had before it the zero drafts of all three instruments.
It completed its first reading of each provision by provision.
This was an ambitious program, and it was carried through within the time available.
The committee has also engaged directly with a number of important and substantive questions.
These included questions relating to the relationship between the Framework Convention, existing international agreements, and domestic law, the scope of the taxes covered and the allocation of taxing rights under the protocol on cross border services, and the range and design of mechanisms for the prevention and resolution of tax disputes.
These questions will be important in determining the effectiveness of what is being built.
The discussion over these two weeks have given a firmer basis on which to revise the texts.
What also stands out is the way in which delegations have engaged with one another.
They did not confine themselves to restating positions.
Rather, they sought the reasoning behind the proposals and put forward formulations designed to accommodate concerns other than their own.
This is the work of building bridges and is what the stage now demands going forward.
Positions are now on the table and the task ahead is to find the concrete solutions that reconcile different perspectives in a single text.
That work happens both in this room and outside of it in bilateral conversations, regional coordination, and informal discussions.
Much of that has already begun and I encourage delegations to sustain it and widen it.
The work has also benefited from the broad and diverse perspectives of member states, reflecting the inclusive character of this process and also greatly benefited from the stakeholder engagement.
Your inputs, perspectives, analysis, ideas, and solutions have been critical to the discussion.
Now that we're working directly on the text, your presence matters more than ever and I really encourage all delegations to continue to engage with CSOs and other stakeholders actively.
As we close the session, the work now shifts to the preparation of revised drafts during the intersectional period.
The seriousness and depth of engagement shown here give confidence that the drafting stage can build on a solid base.
UN DSA and the Financing for Sustainable Development Office will continue to support member states closely in cooperation with the chairs and the co leads.
So on behalf of UN DSA, again, I thank all delegations for their commitment and constructive spirit.
I especially want to thank the Chair, Mr.
Rami Yusuf, and as well for his wonderful leadership of this process as we continue going forward, and also the co leads for their guidance throughout these two weeks and before as well.
I would like to express our particular gratitude to miss Lisa Aka, who concludes her service as co lead at the end of the session for her expertise and her strong commitment to this process.
Finally, our thanks go to our partners from international organizations, civil society, academia, and the private sector for their valuable contributions.
And finally, I want to thank the staff in my office and those who are here and those who are working from home as well for their indefatible, is that the right word? Work and process around the clock as we continue on this process for lean Secretariat, but really thanks to all of the colleagues for their amazing work.
Chair, back over to you.
Thank you.
And before we close, of course, I, as usual, extend thanks to the Secretariat and it's not only Secretariat who are here in the podium, but also we have many behind the scenes who are supporting and special thanks to Patricia who were not able, unfortunately, to attend with this decision, but she's there and she's working with us behind the scenes and following up the decisions like minute by minute online, and hopefully we will have her in Nairobi able to join us.
So I would like to give her a big thanks for all the great work that she's doing for this committee to continue and to progress the work.
So by this, I think we reached the end.
So I declare closed the fifth session of the intergovernmental Negotiating committee on the United Nations Framework Convention on International Tax cooperation.
The meeting is adjourned.
Thank you very much.
Once again.