Tax Treaties and Developing Countries
Tax treaties are agreements between states that divide up the right to tax cross-border economic activity. They set limits on when, and in some cases at what rate, signatories can tax the income from that economic activity, primarily by imposing restrictions on countries’ ability to tax the foreign direct investment that they receive. There are over 3,000 in force worldwide. In negotiating tax treaties, developing economies have often given up a significant amount of their taxing rights over inbound investment.
International efforts to prevent tax treaty abuse and strengthen source taxing rights, together with greater awareness of some of the costs of tax treaties, have led to growing interest in developing countries’ tax treaties. Many countries are seeking to assess the costs and benefits of their existing treaty networks, and to develop policies to guide future (re)negotiations. Some argue that tax treaties should be understood and scrutinised as investment incentives, yet efforts to increase transparency over tax incentives have not extended to tax treaties.
The Tax Treaties Explorer Dataset
The Tax Treaties Explorer Dataset includes over 2,500 bilateral tax treaties, almost 300 amending protocols, 8 multilateral treaties, and certain changes made to these treaties by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). As far as possible, this includes all treaties signed by 118 countries comprising: those that are or were until recently low and lower-middle income countries, all countries in Africa, and all members of the Intergovernmental Group of 24.
Download the data and documentation here, and see the Frequently Asked Questions for more information.
The Tax Treaties Explorer Website
This Tax Treaties Explorer website allows you to explore the dataset of almost every tax treaty signed by developing economies. The various visualisation options provide a means to compare and contrast different treaties in ways that complement analysis of the legal wording. For non-specialist policymakers and others with a stake in tax policy, this is an accessible entry point to understand treaties in comparative context.
Part of the reason that tax treaties often receive less scrutiny than other elements of the tax code is that they are obscure technical documents requiring considerable familiarity with domestic and international tax law to interpret them correctly. While analysis using the dataset cannot replace such an analysis, it provides an additional means of investigating how the content of tax treaties varies between countries and over time.
The Explorer is a project of the ICTD supported by the World Bank and the G-24, with data visualisations by Agile Collective. Explore the website here in English or French.