UN Transcripts — https://transcripts.un.org/ar/asset/k1d/k1da4w3yem
(13th meeting) Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation - Fourth Session — Economic and Social Council — 11 February 2026
Language: en
Automatically generated transcript — may contain errors. Not an official United Nations record.

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IAHWG · Co-Chair · Rami [0:02]:

Good morning everyone. We are starting now. Please have a seat.

So today we're gonna continue in the morning session the discussions for Work Stream two.

And then this afternoon we are gonna convert to Workstream 3. So this is our last session for Workstream 2 Protocol 1. So I'm asking everyone to continue our constructive discussions as we started so we can get the best inputs for the work streams to do their work. Thank you all and over to you, Lisa. Thank you very much.


IAHWG · Co-Chair · Lisa [0:58]:

Rami. Yes, I hope you had a good evening and were able to have a look at what we're going to discuss this morning, which we gave you yesterday as a preview.

Sorry, sorry. RAM is going to make an announcement.


IAHWG · Co-Chair · Rami [1:27]:

So I'm sorry but I think there is important announcement for everyone. So this announcement announcement is regarding a change to the schedule for the rest of the week. So some member states have requested that a closed meeting take place during this week.

After consulting with the Bureau, tomorrow afternoon's meeting will be open only for member states. We will back up again with an open meeting on Friday morning to continue our discussion of Work Stream three. So tomorrow afternoon session is a closed meeting for member states only to attend. This is based on requests from some member states and after consulting the Bureau who agreed and allowed this change. So thank you for this.

Now Lisa, you can continue.


IAHWG · Co-Chair · Lisa [2:27]:

Thank you, Rami. Okay, so yesterday we. Well up to now, just a short introduction. Up to now what we have done, we have worked through the way how to start drafting with input from this floor, the solutions to our problems.

That was in the based on the paper that we had, the options paper. We discussed taxes covered, we discussed services covered, differentiated services. We started off with Nexus. We started off with methods of taxation when we have a Nexus. And now we're going to look at implementation and hear your views on that issue.

There is no problem. And my idea is to go back before we leave or finish at 1:00 clock to go back to Nexus and methods, if that is of interest of you, to give us some more thoughts on that. Because I do think when you listen, you sleep on it, you might have a different view or have not been expressing a view. You might want to express a new view or something that could be useful for us to carry on with.

First of all, I open the floor then to on this issue, which is the implementation issue. And I hope you could consider it overnight. I hope it didn't give you a sleepless night.

So I open the floor, if anyone wants to make an input. I'll have a look here at the Screen.

So this is one of the slides that come up after the problems that we've identified. So how to do this process? We're here for a multilateral process. Some countries think that, that that would work best for a type of solution that we're envisaging. Others says, yes, that might be the case.

But a bilateral negotiation where I can sort of, you know, get a more balanced agreement between two countries may also be a one solution. And so we are now considering and want to hear from you what that means for our protocol.

It could remain silent, of course, which is basically not giving us any very much solutions. And then the implementation would be through bilateral negotiations. We are thinking about trying to provide something that would work for countries who do not have a bilateral tax treaty in force. So that would be have to be discussed as well.

Now, if we do want the multilateral treaty to override bilateral treaties, that is done as well. It's, you know, as an example, we've had the mli. We also have the fast track instrument. So there are instruments out there which have sort of of address this way of overriding issues or other treaties in a way that works. So we could have either MLI style matching systems or other systems.

So really would be interesting to hear how you think that we should start this work.

Thank you. Russian Federation, please go ahead.


Russian Federation [6:46]:

Good morning, colleagues. Thank you for giving me the floor. Today we are concluding work on the second position paper, or position paper rather of the second group. Obviously the question is.

If this happens, if we complete it, how it will be put into practice. So answering the question in this slide, we would like to say the following. The Framework Convention itself is a document that contains provisions on high level obligations in the area of terms of reference. At the same time, the protocols to the Framework Convention should play the role of a technical instrument that will make it possible to fulfill the obligations countries have taken on. This is why we believe that the most optimal version to implement the agreements reached or the approaches that have been developed is a protocol similar to mli, MLI style matching system that is shown on the slide.

As we see it, this is the optimal approach because first of all, it's a multilateral process which makes it possible to accelerate the process of the implementation of the decisions adopted. Secondly, such a mechanism includes element of bilateral relations or negotiations which precisely will ease concerns of States on possibly excluding certain decisions to benefit one country. Thirdly, many are already familiar with this approach. There is experience that they have which will make it possible to take into account all the positive aspects and to take into account or exclude certain drawbacks that the parties have already seen in practice. That is regarding the questions on this slide.

Now, as far as the question the co leader mentioned what we should do with countries who have not concluded bilateral agreements with each other. Well, we would ask us to return to revisit this matter and to take the floor again when we discuss this further now. Thank you.


IAHWG · Co-Chair · Lisa [9:27]:

Thank you very much. That was very helpful.

Russian Federation. I have India. Please go ahead. Thank you. Thank you.


India [9:36]:

Madam Kohlid. It's very interesting that the first bullet says remain silent. Sometimes silence is the best option. And as Mahatma Gandhi who said that you should speak only when you can improve on the silence. I'm not sure we can do that now.

But to answer the remaining now, the MLI style matching system would be perfect if we were looking at a scenario where all member states had equal number or fair number of tax treaties. But this is because the MLI would basically it amends existing DTA's tax treaties. The same could be said of the UN fast track instrument. Now here we have a situation is that the number of tax treaties that our member states have, they are very different. They could, they range from 100 to a much smaller number.

So how are we going to deal with this, this situation? Are we going to, and this, this discussion will come up, I assume in every protocol. This will also come up in the, in the protocol that we will discuss this afternoon onwards. So this is something that this design we have to think about as to how are we going to implement this protocol in an off treaty situation. Is it that when country A and country B do not have a treaty tax treaty, but they sign up to the protocol, so they will be able to apply the provisions of the protocol in respect of the subject matter of this protocol, that is the taxation of services.

But then what about countries C and D who don't, who also don't have treaties with country A and B but they have not signed up to the protocol. So it would then mean that country A and B would just be taxing each other, taxing each other's digital services businesses, but they would probably be helpless in respect of country C and D in the matter of application of this protocol, there would be other options to them. They would, they would, their domestic law would probably operate and so on and so forth. So what is likely to happen? Because probably as the distinguished delegate from Russia said, we need to come back to this discussion.

What is going to happen is that if we do not find a solution to this and remaining silent is again not the solution. If we do not find a solution to this, then we will have a very uneven application of this protocol. And this protocol deals with a subject that is very important, that is very vital. So therefore probably we can have two. I mean this is just a suggestion.

We can have a two track mechanism. One that deals where there are treaties where two countries who have signed up to the protocol have a treaty so then they can fall back on a MLI style matching mechanism because it is easy, they have a treaty that will get amend it to that extent. But probably for two countries who do not have a treaty, we will have to fall back on a bilateral negotiation between them that they will have to bilaterally then negotiate not in a treaty but through another instrument, the provisions that apply because of this protocol. This is just one thought that comes right now. But maybe we can hear more on this from other member states.


IAHWG · Co-Chair · Lisa [13:10]:

Thank you. Thank you, India. Yeah, I'm just thinking perhaps one can deal with these two tracks through annexes so that, you know, the ones that would override existing tax traffic treaties would have one annex and another annex would be applicable for those who wants to be bound by a bilateral sort of type of agreement between them.

In my part of the world, we have, I think it's still there. It's the Andean Pact which was a multilateral tax agreement. And that Andean Pact had two annexes, one annex which dealt with the tax treaty between members and there was an Annex 2 that obliged the members to negotiate a certain type of agreement with non members. So it was, you know, it was quite an interesting figure. But just as of a history of tax treaties, our first tax treaty with Argentina was because of that Annex 2, because Argentina was not part of the Andean Pact, because this was just the Andean countries.

So you know, there are history behind these different way of, of making solutions to that problem. So thank you, India, Nigeria, please go ahead.


Nigeria · Africa Group [15:03]:

Thank you, Madam Kochi. Good day everyone. It's our pleasure to be here. And I'll be speaking on behalf of the African group.

For the African group, we understand that we are negotiating a protocol that the intention is as many that sign to this protocol, the provisions of the protocol will be binding on them. So and we, our expectation is that the protocol we have provisions that allow or that mandates parties to the protocol to ensure that their treaties or their other agreements comply with the provisions of the treaties. So in that aspect we are expecting that the protocol we mandates members to the protocol to amend their existing tax treaties. And in that Respect. We expect the Protocol to provide mechanism for fast track amendment of treaties among signatories to the Protocols and such amendment.

We expect it to be compulsory for those that sign the Protocol. How should it be done? We expect that some form of compatibility rules may be included in the Protocol so that it can amend those treaties.

How should it be done? It should it be MLI style? At this stage we cannot determine whether it should be the MLI style, the matching system under the MLI because we also understand that there are some complexity in the mli. But the good thing is we have the fast track instruments under the UN that was developed by the last Task Committee. Can that be worked on and adopted for this process?

We think that may provide better options as long as it can take care of those compatibility rules to ensure that we have the rules are compatible with the Protocol. So that will be our opinion for now. For those that are member of the Protocols, we expect it to be binding. But for those that are not a member of the Protocols, the good thing is that we also have the the Framework itself that have a provision that require fair taxation and require the renegotiation of rules that are inconsistent with the Protocol. So as far as many that are member of these rules, the Framework, we expect that the Protocol will be able to provide a process through the fast track instrument for them to amend their tax treaties.


Nigeria [18:22]:

However, for those that are not member of the Framework Convention or we are of the view that we have domestic rules that we effectively that are still there to provide rules for taxation in non treaty situation. Thank you, thank you very much.


IAHWG · Co-Chair · Lisa [18:44]:

Nigeria. Helpful Israel, Please go ahead.


Israel [18:49]:

Yes, thank you.

I have to say regarding the MLI that I'm not a big advocate of the MLI because I was dealing with it in my country and I find, I see that the people, the private market is very hard for them to understand how it works. It's hard for them to understand when a specific treaty, when are the provisions apply to specific treaty. And I got a lot of phones and they are asking me how to is it what to do with the specific treaties. It's hard to understand when it applies to a treaty. It's hard to understand which articles are going to change and how.

I have to say that instead of only one document, legal document, which is the treaty, you have now four documents. And people find it very, very hard to understand. So I'm not sure, but it is.


Nigeria · Africa Group [20:04]:

A good instrument to use. Thanks.


IAHWG · Co-Chair · Lisa [20:10]:

Thank you very much. Israel.


Israel [20:11]:

Yeah, I think for those of us who were in the Tax Committee in the last group membership, we came up with the Fast Track instrument and we heard heard a lot of traumatic experiences from countries about implementing mli.


IAHWG · Co-Chair · Lisa [20:33]:

It was interesting because some had really bad experiences, other didn't have any bad experiences at all. My country, we didn't have any bad experience and it's been implemented and no problem at all. But what I wanted to say with that was that depending on your legal systems, you probably have different issues with a multilateral agreement being affecting bilateral agreements. I mean, it's structurally, legally, it's a complex issue. But I do think, and I think that lots of work went into the Frost Track instrument that was elaborated under the Tax Committee in order to solve the problems that some countries had recently had with the mli.

So I think there is a step forward in that sense. I think that there are instruments out there that we can use and we could be inspired by and see how it works for us today. But I do take the point. Israel, there are countries who've had really bad experience with nature. Mli, I don't have any other.

Hands up.

Good. Saudi Arabia, please go ahead.


Saudi Arabia [21:57]:

Thank you, Khalid. I think generally we believe that remaining silent and leaving everything to bilateral renegotiation would likely not deliver a meaningful change. We think that an automatic override of all treaty provisions may raise concerns where existing arrangements are functioning well and they reflect previously negotiated balance. We believe that MLI seems the way to go, but at the same time it leaves questions thinking that if simply relying on a matching principle as under the MLI still leaves an open question of what happens where participation is not aligned. And I think similar to the concerns raised by India and Nigeria, maybe it would be useful to think about whether the protocol should remain or should think about containing core set of minimum commitments that applies between between parties and then other elements that remains optional.

This could provide maybe a clear baseline and flexibility. But again, I think it's difficult to know what is an implementation framework would look like if we still are not sure about the design of the rules. So maybe after we get those cleared out, we move to the discussion in depth of the implementation framework. Thank you.


IAHWG · Co-Chair · Lisa [23:37]:

Thank you very much.

Saudi Arabia, Kenya Please go ahead.


Kenya [23:43]:

Greetings. Excuse my voice, I have a cold. I think I've gotten a bug.

Allow me to start by stating our position that we align with what has been elucidated by Nigeria on behalf of the African group. And we believe that the status quo, and this I'm addressing what Khalid, you've put across status quo is unpalatable in relation to taxation, of course, cross border services. We do argue in favor of re engineering and that one I'm underlining and steering away from the existing systems that bring about imbalances.

This multilateral process in form of the first early protocol should supersede incompatible existing treaties, bilateral treaties for that matter. Provisions as envisaged and under the mother of all treaties. This is the Vienna Convention as well, articulated under Article 33, which speaks to the principle of recency on the same subject matter. So if we are entering into a treaty and this particular treaty speaks to the same subject matter, then the letter would take precedence or would be put into consideration. So when all the parties to the treaties earlier treaties are parties also to the later treaty, but the earlier treaty is not terminated.

This is a verbatim of what that particular article speaks to or supersedes in operation under Article 59, which speaks to termination of treaties. The early treaty applies only to the extent that its provisions are compatible with those of the later treaty.

Further, the convention also, this one is I just want to bring it so that it can also speak to non treaty situations. As much as it's a long shot, but it's good to understand that it also exists as a law. The convention also speaks to the concept of privity, which basically means that the third parties will not be bound unless the provisions of Article 38 come into play. Which is a question of rules in treaty becoming binding on third states through international customs law.

So I wish to just remind members, delegates for the that matter that we are not drafting an MTC which acts as a guide, but a convention, an agreement, a treaty that is envisaged to bind. Therefore, we are looking at an instrument that speaks to substantive issues uncertainty that will address the long standing issues encountered by states with low capacity. The treaty should encompass and espouse on set principles which cover the school scope of services, categories and method, methodologies. Thank you. I submit.


IAHWG · Co-Chair · Lisa [27:00]:

Thank you very much. Kenya, Ghana Please go ahead.


Ghana [27:06]:

Good morning. Good morning. Yes. All right. Thanks for giving us the opportunity.

Yes, for Ghana, I would say from the beginning we align ourselves with a statement made by Nigeria on behalf of the Africa Group. And we make this comment in our capacity in support of what has been said already by Nigeria and also seconded by Kenya. And now to the questions on the screen with reference to bullet one and remaining silent or not. Obviously to remain silent is not an option, which of course which is why we have come to this table and all of us member states are gathered here to think through the issues that have been bothering US over the years and certainly leaving the protocol to be on its own and allow member states to do bilateral renegotiations is obviously not what is desirable in a sense that renegotiation of tax treaties, bilateral or multilateral, in which sense it's quite a difficult task. And as we have committed ourselves from about two, three years ago to do this work, agreeing on the basis that there are imbalances in most of our existing tax treaties, then of course it's important that this protocol, which is also a convention as clearly stated by Kenya, will go a long way to have automatic effect in terms of amending those existing tax treaties, which of course we are aware that most of these existing tax treaties have certain to a large extent largely resident based, you know, rules and were developed Sometime in the 60s, some were developed way before.

And many African or developing countries have signed on to these treaties mostly not working too well for their economies and eroding mostly their tax bases. And so Ghana with us, we have a strong opinion that this protocol will become overriding to amend this increase so that we don't allow member states to go into one on one bilateral negotiations because that would take another time. Sometimes getting even a member state to come onto the drawing board or to the negotiation table becomes, becomes another whole issue. And so this is the best opportunity for us to do that. And issues of MLI style matching system or whichever.

I think my colleague from Nigeria who spoke on behalf of the Africa Group made a very good point or statement to the effect that with the complexities and the issues thereof, which of course as we have also alluded to Madam Co Chair, that based on that the UN Task Committee the previous developed the fast track instrument, we can look at that and align ourselves with that particular fast track instrument and possibly also look at it in a context to see which one worked better for us. Of course India proposed something which was quite okay, but to a large extent I think the fast track instrument style will be quite feasible. And the issues on the non treaty situations, of course, as Kenya said, this is also a treaty. And of course members country A and B who do not have a bilateral treaty, but they sign on to this, don't need to do anything because there's no existing treaty which is seem to be not in a balanced state. And so this one will become their blueprint to which they will do what they have to do in respect of cross border services.

Other matters will also be, I'm sure will be negotiated through other means. Yes. So Madam Chair, I think this is what I Have to say on behalf of Ghana, thank you very much. Thank you very much. Ghana.


IAHWG · Co-Chair · Lisa [31:35]:

That was very comprehensive. Thank you. Morocco. Please go ahead.


Morocco [31:44]:

I will speak in Arabic.

Thank you, Ms. Khulid, for the chair, for giving the floor. We believe that.

The implementation or entry into force might seem premature. But we believe that that it is very important to discuss this at the time being since it might affect our perception of the rules that we are here to make. So we believe it is beneficial to incorporate this agreement. We know it is an agreement, not a model. So it can incorporate the rules that will give it the flexibility which is required in multilateral context.

And among the flexibility rules that we believe would be beneficial if included in the agreement is to enable the States to choose the situations when the protocol will be applied. For example, to apply the protocol only on the situations when there are double taxation treaties. This is why we are here to amend some rules in the existing treaties which do not ensure the fair taxing right. But we should have enough fair flexibility to apply the agreement on other situations where there are no treaties or double taxation treaties. We can include other flexibility elements like in case of double taxation agreement to give the states the ability not to amend or change the bilateral treaty through this convention.

I mean where the two parties are signatories of the Protocol or this agreement that we are here to elaborate, this will not affect the existing treaty because the parties believe that the existing one is better for them.

So as to the implementation, it might differ if there are existing double taxation treaty or not or bilateral treaty or not. But as to the fast track instrument, it might be the path and the way to go in this situation. Thank you.


IAHWG · Co-Chair · Lisa [34:41]:

Thank you very much for that. Morocco, Norway.

Please go ahead.


Norway [34:49]:

Thank you, Madam Koled. And good morning to everyone.

We have some preliminary, maybe more technical comments on what we might consider under a possible implementation framework here. We think it's important that we continue to reflect on this as we go deeper into the scope of the Convention. Of course, because the implementation work framework to us would in part depend on the content of the Protocol itself. For example, should it consist of core mechanisms and optional mechanisms as suggested by Saudi Arabia. And we also note the issues raised by India.

These are important issues that we should continue to reflect on with respect to the use of an MLI style instrument.

We are many countries who have experience with this. Our country could use this instrument. But it's a very complex exercise and it's also it risks creating unclarity for taxpayers and tax administrations as to what actually applies when it comes to the the FTI instrument. And for the mli, it was also the case that a number of countries couldn't use that for legal reasons. And that was just a fact.

And that might be the case here as well for the fti. Like you, Madam Colleague, I was a member of the committee that drafted this fti. This is an even more complex instrument than the the mli. And at least for my country, it is clear that that is not for legal reasons a possible option to use. But of course you could use this protocol to negotiate bilaterally anyway, reflecting what is in the Protocol when it comes to bilateral negotiations.

We think in some cases that would be more prudent or appropriate because depending on the content of the protocol, you could have more of an imbalance in your tax treaty on a bilateral state there. So it might be necessary to implement implement the protocol through bilateral negotiations in specific instances. I think we would agree with Nigeria on the issue of where there is no treaty in place, that in that case domestic law applies. So it would of course be up to two parties to decide whether or not they want to to have an instrument that covers only cross border services between them. But we just note that if that is going to be an option in this protocol, you would need quite a comprehensive infrastructure in the protocol to facilitate that.

You would need provisions on residence, you would need provisions on PE, you would need provisions similar to Article 7. You would need probably a provision relating to MAP to have the whole infrastructure that you have when you allocate taxing rights in a tax treaty.

We also note that Kenya brought up the Vienna Convention and this leads me to a broader point that we should probably consider here and also in relation to the Framework Convention on these implementations, documentation issues and other issues in the Framework Convention that it would be very good to have the views of the Office of Legal affairs, in particular on these issues. We think they carry a lot of experience and can guide us in a direction that is compatible with what is used elsewhere in the UN and also guide us in how we should design this feature. Thank you. Thank you. Norway.


IAHWG · Co-Chair · Lisa [39:40]:

Singapore, please go ahead.


Singapore [39:45]:

Thank you. Thank you, Madam Colleague, for giving me the floor. Aligned with previous comments, I think at the outset it may be useful for us to clarify the role of the Protocol where there is no tax treaties between two jurisdictions. I think in these cases domestic law would apply without restriction, as rightly pointed out by Kenya and Norway. And I think it will be useful to understand how the Protocol is meant to work in these situations, which, like Norway mentioned, might not be that straightforward.

And for situations where tax treaties do apply to between jurisdictions, we echo the comments made by earlier distinguished delegates for the need for flexibility. I think from the discussions that we have heard over the past two days, it's clear that jurisdictions have different policy preferences, different levels of comfort with the options that's currently being discussed and considered. And this reflects the white diversity in domestic tax systems as well as existing tax treaty network. And given this diversity, I think it is important for the Protocol to adopt a flexible approach. A mechanism similar to the baps, MLI or whatever you call it could be helpful.

I think this would allow jurisdictions to decide on which bilateral treaties should be covered and which provisions within the Protocol they wish to adopt, and if necessary also make reservations on certain provisions. And our view is that such an approach avoids automatically overriding existing bilateral treaties which has been carefully negotiated, and also respects tax sovereignty and policy space of all jurisdictions and allow jurisdictions to calibrate their commitment in line with their policy objectives, administrative capacity as well as economic context. And our view is that this is a practical way forward to bridge the differences that we have heard over the past two days, over the past few months of work stream discussions, and also hopefully help us achieve a protocol that is more acceptable to many jurisdictions. Thank you. Thank you very much.


IAHWG · Co-Chair · Lisa [42:03]:

Singapore. Yes, hopefully we can come to the solution of a protocol that will be obviously signed up to by a large part of this group, France. Please go ahead.


France [42:22]:

Thank you, Madam Chair, and thank you for all these reflections which make it possible to advance, make progress regarding the application of this Protocol. Regarding France, we have over 125 agreements. We are one of the states with the most bilateral agreements. And so it is something that is very important for us. On the other hand, I do understand that the protocol one just like the others, are meant to be operational and must really get into the nitty gritty.

So what my criticism of these two elements is, at least for France, is that we have a lot of treaties and on the other hand we want operational commitments. And that raises a difficulty. I can understand when two states, states do not have a treaty or that a state has any, no kind of treaties at that such a state could benefit from a multilateral instrument which would in this way be much more efficient for it. Although as Norway said, I also understand that even without having any bilateral treaties, these states would no doubt like to have exchanged their agreements in a bilateral format on this agreement, on this framework agreement, because national legislation has primacy or prevails and for an entry into force of a Treaty, the agreement of the parties is a minimal condition as far as we're concerned. We don't really understand how we could apply the details mentioned in the protocol to our 125 bilateral treaties.

It's true that we have adhered the EPPS multilateral instrument, but I just want to recall that those are just kind of general principles that, that modified or built on model agreements that we have and that followed the logic of these treaties.

So regarding these protocols or the Framework Convention, I understand that we want to kind of have a tabula rasa, start with scratch, look at the, review all the in depth issues. But I have a hard time understanding how we can link up this operational nature of this treaty with the multitude, the numerous bilateral treaties and their specificity. Because these negotiations, these bilateral treaties are based on mutual trade offs and they reflect a comprehensive global balance that is the result of these negotiations. So France is in favor of leaving the application or implementation of these protocols in the framework of the bilateral treaties. First of all, to adapt the details of this Protocol to the various articles of these bilateral treaties and their specificities and furthermore, to respect the balance that we have achieved in international treaties.

And this is very important to ensure legal security to all of our taxpayers, whether we're talking about individuals or businesses.


IAHWG · Co-Chair · Lisa [46:24]:

Thank you. Thank you very much, France. Yes, I think the multilateral way and the MLI and the Fast Track instrument is actually designed specifically to countries that have a large amount of tax treaties. So that that should be helpful for them to be able to amend them quickly.

That I think was the objective. But you know, fully take on note that not everyone had a good experience with MLI and Fast Track Instrument is still out there for consideration by ecosoc. But we have to work with the way that we think we can implement what we agree here as much as possible and as quickly as possible. I think I. I think that should be perhaps the objective. Switzerland, Please go ahead.

Thank you. Madam Kolid, I guess this whole discussion is also linked to Article 15 of the Framework Convention. And maybe I take the opportunity to repeat what was said. Sorry, I have a bit of a cold repeat what was said last week on the urgency maybe of starting to draft that article as well.

Regarding, I mean here we're at a preliminary stage as we don't know what the solution is. But I would say one thing that is clear is that if we would only choose the option that this protocol supersedes all bilateral treaties that are incompatible, that is going to dramatically reduce the number of countries who could sign on to this protocol, because, as has been already pointed out, most tax treaties are an agreement. It's like a relationship, it's like a marriage. Both countries agreed on certain terms, there's a balance. And to all of a sudden have what could be a very important taxing.

Right. Change would fundamentally change that balance. And it would. I can't imagine that countries would accept to give up maybe something across the board automatically for all their treaties. There might be some where it would be possible.

So once we talk about selecting what treaties it would apply to them, we get into a more MLI type situation, which I agree with. Those who also have certain privacy pointed out the difficulties with the MLI process, which all of us who had to implement MLIS provisions experienced. Well, some people seem to be more easily than others. So all that to say that if we want to have a broad support or as broad as possible, I think we. I mean, I don't think the two things are contradictory.

We could have some countries agreeing that this supersedes and then other countries who don't want to have that approach to have a more bilateral approach in order to get the most support for the protocol.

So thank you very much for that. Switzerland. Yeah, I think we need at this stage to sort of keep different options open. But I think it's clear that.

What we want to provide is a solution that countries can sign up to without feeling that they are, you know, doing something totally without any reciprocal sort of benefits. I think, you know, countries will sign up to something because they think it's good, and that's what we're trying to produce. And when we talked about MLI, and when I talked about mli, I think the problem for us as tax officials to implement it is not because of us, our personalities. I think it's because we are representing so many different legal systems. And that, I think, is very illustrative, that you have to be careful when you are in a multilateral setting, that not everyone has it as easy as others might have.

So it's not a personal problem. It's more of a constitutional problem sometimes, or the way that legal systems works in their countries. Senegal silvoplay.


Senegal [51:40]:

Merci. Thank you, Madam Chair. Good morning. Senegal aligns itself and endorses a statement made on behalf of the African group by Nigeria in our national capacity in responding to the questions that have been asked. We think that we need a combined approach depending on the specific situations.

If we are in a situation where the two jurisdictions are linked by a fiscal treaty and the two countries are signatories to the Protocol at the same time then and then an MLI type instrument would be the most appropriate because it would prevent us having to renegotiate bilaterally, which would take years and would waste a lot of resources, both financial and human.

Now, if one of the parties to the treaty is not a signatory of the Protocol, the prospect negotiations could be considered envisioned. The second case is when the two countries do not have a tax treaty, but the two jurisdictions did sign the protocol. And in that case the Protocol could serve as a legal basis to implement the establishment of cross border services. If the third situation the country's jurisdictions don't have bilateral treaties, nor have they signed nor have they signed a protocol, then in that case the only alternative is the application of domestic law. To present the to have the right of taxation at source would conclude with a question that I put to everyone.

You mentioned that the objective is to correct the imbalances that have occurred. This means that at the level of the resolutions118,230 this will be a high level commitment that will also be in the Framework Convention. If we consider inter alia that the Protocol should constitute a tool for implementation and if we have a protocol that has a lot of options and the implementation of these options is possible depending on the decision of the countries, do you think that the challenge of correcting the attribution of rights of taxation would be achieved if we are basing only ourselves only on the Protocol? Would the Protocol be the most appropriate instrument to correct these imbalances? Shouldn't we think of other instruments that could be in line with the Framework Convention and that would allow us to have a binding provision and have a link between the Convention and its goal and have a high level commitment.

I think these are questions that we should reflect on in order to have a coherence, to give coherence to this whole process. Thank you.


IAHWG · Co-Chair · Lisa [55:30]:

Thank you very much Senegal for those questions and I do think we need to ponder on them. So thank you for your input. Denmark, please go ahead. Thank you Madam Chair for giving me the floor. I'm also having a call, so my voice is a bit affected by that.


Denmark [55:46]:

But to join my into this preliminary thoughts, I will say that we favor the sentiment that have been expressed in the room for an MLI student in situations where you have a DTA between countries and there are many reasons for this which have been expressed. So I will not repeat for the situations where there are no treaties, we do agree with what has been said by Singapore and Norway. We would assume that national Law would apply in those situations. So we do also seek a bit more clearance of how this work is envisioned to fit in in those situations. But this will be my preliminary remarks for now.


IAHWG · Co-Chair · Lisa [56:24]:

Thank you. Thank you. Thank you very much. Denmark and yes, where some of us have, I've been lucky not to. I traveled from plus 30 degrees to minus 18, so it was like 50 degrees difference when I landed in New York.

So I feel very fortunate that I'm not ill anyway, on that issue, I think in the end our protocol of course can be silent on this issue. But on the specific issue that you raised between non treaty partners, I think we should at least work now on the possibility for them to actually include themselves in solutions here, if that's possible. But of course, I, as you've just said, and I think India also said that if you don't have a relationship, the treaty will not override any treaty. It will not override your domestic law. I think.

So let's keep that door open and see how we can make those solutions. Algeria, please go ahead.


Algeria [57:44]:

Merci, Madame la Presidente. Thank you, Madam Chair. I want to align myself on the statement of Nigeria on behalf of the African group. I want to also go back to the the origin of all this work and that is when we negotiated the terms of reference of the Framework Convention. We were told about an imbalance between the various treaties.

There were existing tax treaties which eliminated the right to of taxation on services of source countries. And it's true that the tax treaties have been were negotiated with the goal of having a balance. But the existing treaties, many of them are quite old and they were based on negotiation where the physical presence was part of the equation. That is not the case today. The situation has completely changed.

Economic models have completely changed. And so we believe that the Protocol on Services provides a solution that could restore some balance in the existing imbalances which are currently only based on, on the rule of substance. So in this case we attach particular importance to the primacy of the protocol over the over the international tax treaties to be able to modify them to complement them. And in particular articles 5 and 6, 5 and 7 regarding of the tax conventions regarding the benefits of the profits of companies. Regarding the approach to be adopted, we're in favor of an approach such as the MLI matching system or the fast track instrument which could indeed provide the possibility to states to insert new provisions, in particular those in existing treaty models.

So this is a, this is a rapid solution that could save resources because negotiation of all treaties requires takes time and resources Both financial and human. Now, as far as the question of the non existence of treaties, we believe that the Protocol will not be able to be applied to situations where there are no treaties. We believe that if there are no treaties on which the Protocol could be applied, then it would be domestic legislation that would apply. But we're ready, we're open to discussing all possible approaches that could be incorporated into this protocol. Thank you very much.


Cameroon [1:00:48]:

Thank you, Madam Chair, for giving me the floor.

Regarding Cameroon rejects formally the option of silence or the simple bilateral renegotiation. We believe in terms of text diplomacy could no longer be disconnected from the rapid change of the digital economy. We support the position of the African Group and we believe that this protocol must be an instrument of automatically updating. It should prevail over all bilateral treaties. Without this clause of primacy, we would condemn our tax administrations to decades of stalemate and meanwhile the taxable wealth will continue to evaporate.

Madam Chair, we believe also, and here we're speaking on behalf of Cameroon national capacity, not as African Group, we believe that legal superiority.

Might not be enough for countries that are not signatories of the Convention. This legal primacy or superiority might not be sufficient without the capacity for implementation. In particular, regarding platforms that are located in countries that are not signatories to the Convention. So would that mean that each country would need its own national legislation for this purpose or renegotiate or negotiate bilaterally treaties at the risk that this may take years, given that if the countries that are not signatories of the multilateral Convention would be ready to accept the provisions of the Protocol, they would have simply signed the multilateral convention. So might be effective to think in terms of that these implementations should force these platforms to step out of the opacity, not being opaque.

So in the provisions on implementation, there should be an obligation on transparency on algorithmic transparency for all platforms. If a platform has the technology to target a consumer, then it also has the technology to collect the tax on behalf of the source state, whether there is a bilateral treaty or not. And so in this context, this transparency should not be based merely on good faith or good faith statements by the platforms, but. But rather it should be based on certification. Thank you.


IAHWG · Co-Chair · Lisa [1:03:55]:

Thank you very much for that input. Cameroon, Egypt, please go ahead.


Egypt [1:04:01]:

Thank you, Madam Khalid for giving us the floor. We align ourselves with the statement made by Nigeria on behalf of the African Group. We expect the Protocol to include clean provisions to ensure proper access and effective application of tax treaty rules.

We also believe that there is a need to amend existing tax treaties so that they reflect what will be agreed in the Protocol and the Convention which includes alignment with multilateral instrument matching system. Because the multilateral tax treaties are complex, we propose that the United nations development develop a fast track instrument to support quicker and more practical implementation. However, we may revisit our thoughts based on the discussions taking place in the room. Thank you. Thank you very much for that input.


IAHWG · Co-Chair · Lisa [1:04:55]:

Egypt, I have Canada. Please go ahead.


Canada [1:05:03]:

Thank you, Madam. Good Chair.

I want mainly to echo the views of many that have spoken before me.

It's going to be preliminary and high level by nature because it's certainly a question on which we'll need to come back later on when we have a better sense of the decisions that will be made with respect to nexus and method of taxation. But I'll start by sharing the view that was expressed by the distinguished delegate from Singapore. I think it's an honest reading of the discussions from yesterday that there is quite a lot of differences among delegations in terms of particular economic circumstances and policy preferences. I think it's the we need to reflect these differences in what we in the approach that we'll decide to adopt for the Protocol. We certainly believe that it would be very challenging for us in particular, but presumably for other countries as well if the Protocol were to adopt an approach of overriding existing bilateral treaty.

I think either directly in the Protocol or by a provision that would be included in the Convention. Canada also has a very wide network of tax treaties. So that would raise and as was said, treaties are militarily negotiated and reflect a balance of compromises that are made between the two countries parties. So for us it will also raise the same type of concern as was expressed by the delegate from France with respect to preserving the appropriate balance in bilateral treaties.

I think to the point that was made by the delegate from India that we need to to have flexibility in terms of if there is a treaty or if we are an institution where there's no treaty, we support this. But we probably will need to think to go a bit beyond this and thinking about the flexibility that needs to be provided under the Protocol. I'm thinking in particular in the type of approaches or the of type, type of nexus or method of taxation that will be included in the protocol. I think we should think as well as the type of what flexibility we want to leave to parties the protocol in terms of deciding which approach would apply. I agree with the comment that was made that I don't think it would be the right result if the two parties to the Protocol would be be in a position to apply a certain approach that neither of them won't.

So I think we need to think about the type of flexibility that is needed here. And just to hang. I share as well the concerns that were expressed by Norway first expressed by Norway about the technical challenges of coming up with an approach that would either override or apply in coordination with existing treaties or that would apply the approach in non treaty situations.

We share the questions that was raised and we also support Norway's proposals that we should seek advice from the Office of Legal on this particular question. That could be very useful to inform our discussions going forward. Thank you.


IAHWG · Co-Chair · Lisa [1:09:04]:

Thank you, Canada. Just a question on that last point and perhaps this is to Norway as well. I think the MLI was put forward to the legal secretariat of the oecd. I think that the fast track instrument that the Tax Committee developed has been put forward to the legal secretariat of the ecosoc. So I think the problems that countries face are because of their particular legal systems, which we will not get the response from on that international level.

So, you know, I think asking the legal secretariat, you know, on these things could be a good thing. But I think we must understand anyway that countries have different legal, you know, ways of dealing with multilaterals situation. This particular case is not easy. I mean, for those of you who had real problems struggling with mli, you know, absolutely fair. And you know that when we did the fast track instrument, we tried to take care of that.

And legally what members said in that case was that they technically it is working, but that doesn't really help everyone. I just wanted to be sort of clear on that. Because of the particular situation of each country, I think that that is going to be always there and therefore each country has to think about it like sort of in their legal system, how it would work. I see that Norway, if you want to respond to that. Yeah, please go ahead, Norway.


Norway [1:11:15]:

Thank you, Madam Colleague, for letting me take the floor directly. That's kind. Yeah, I completely agree with you. The MLI was developed under the the advice of the Legal Affairs Unit at the OECD and the design was based on their advice. And like you said, nevertheless some countries still found it difficult to use in their legal context.

So completely agree with you on that, that it's probably an approach that could be followed by and I think many countries confirm that here today, but had some issues with the practical implications of using that instrument. But when it comes to the FTI that was developed by the UN Tax Committee, That kind of approach could of course be considered but that was developed like a self standing instrument and we are now developing a different kind of protocol I think so I think our point still remains that it is necessary to have the involvement of the Office of Legal affairs on this matter and on other similar matters in the in this process to ensure and have the best advice here at the UN on what is a legally feasible approach under similar like UN and frameworks. But still I think it would remain the case that in the end what countries can use for implementation limitation would probably depend on their legal system. So just wanted to clarify that. Thank you very much.


IAHWG · Co-Chair · Lisa [1:13:18]:

Thank you very much Norway. So we are actually negotiated at coffee break today so you are very welcome to have a coffee race and come back 10 to 12 please.


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IAHWG · Co-Chair · Rami [1:49:25]:

Welcome back everyone.

We are starting now so please have a seat.

Lisa, please proceed with the discussion.


IAHWG · Co-Chair · Lisa [1:49:43]:

Thank you very much. Rami. We're going to carry on with the members taking the floor and after that I have four members actually on the line and after that we have stakeholders so please go ahead China.


China [1:50:04]:

Thank you Madam Colleague. I would like to thank the colleagues who made the interventions in this morning's section. Yes, things will be more difficult where parties to the Protocol have DTA in place already. I agree with the comments made by Kenya and some other countries that when a Member State sign and committed the Protocol, it may already agree on the subsequent changes or interaction with that with what had been provided in its domestic laws and bilateral treaties. But for the time being, it is not necessary to or too early to apply the word or concept like supersea here.

For the existing bilateral treaty, as already pointed out by many colleagues, it represents a very balanced or delicate package of all articles regarding many types of income, not only articles concerning cross border services and such balance in many DTAs in many bilateral treaties is somehow unique and delicate. As for different treaties, different treaty partners may have different positions and areas of interests which may lead to a different trade off as a whole. So any changes to the existing bilateral treaties should be dealt with carefully and in a more causalistic point of view. As for this protocol, how to interact with the domestic laws and bilateral treaties is pretty much subject to its future design. So my preliminary thought to this question, and I would like to echo the comments by Singapore, that we should have more flexibility in the design of the Protocol to attract more Member States to sign and commit to the Protocol, especially those with a significant number of bilateral treaties.

I stop here. Thank you.


IAHWG · Co-Chair · Lisa [1:52:12]:

Thank you very much. China and yes, I think the difficulty we're facing, but I'm sure we overcome it, is that it's like sort of designing something to that members like to sign up to and then what comes first. So you know, it's that balance that's difficult. But I'm sure we're getting there. But we have Sierra Leone.

Please go ahead. Thank you.


Sierra Leone [1:52:50]:

Good afternoon. And for Sierra Leone, our intervention is principled, practical and clearly aligned with the submission made by Nigeria on behalf of the African group, as supported by Kenya, Ghana, Morocco, Senegal, Algeria, Cameroon, Egypt and others chair on the question put up for discussion. We have looked at them on a step by step basis. Sierra Leone acknowledged the imbalance in the current international tax system. The existing network of bilateral tax treaties was largely negotiated under asymmetric bargaining power, limiting source country taxing rights.

For developing countries, bilateral negotiations are slow, costly, often unrealistic, especially where capacity constraints exist. Digitalization and cross border services exacerbates these inequalities as income is increasingly earned without physical presence. While bilateral treaties remain important, relying solely on bilateral renegotiations risks perpetuating existing imbalances and delaying urgent needed reforms on multilateral Implementation Sierra Leone explicitly supports a multilateral approach emphasizing speed, inclusiveness and fairness. Our position is that a multilateral protocol offers a faster and more coordinated implementation, greater legal certainty and reduce administrative and negotiating burden for developing countries. For Sierra Leone, we support a multilateral approach as the most effective means of ensuring timely, consistent and inclusive implementation of agreed reforms, particularly for developing countries with limited negotiating capacity.

Sierra Leone acknowledged, not dismissed, the argument for bilateralism but clearly explained its limits. Our views are Bilateral negotiations may help address country specific concerns but cannot be the primary implementation mechanism. Over reliance on bilateralism wreaks fragmentation of rules, one sided outcomes and delay benefits for source countries. While bilateral negotiations may complement the Protocol in specific circumstances, they should not be the sole or default mechanism for implementation. On the question of how should the Protocol address these issues?

Option 1 Remain silent Sialung rejects to be silent because silence effectively preserves the status quo. It places the burden of reform on countries least able to renegotiate. It undermines the purpose of a multilateral process. Remaining silence on implementation would risk rendering the Protocol ineffective for Sierra Leone and many other developing countries. On Option two as a country, we support in principle with safeguards because these options ensure real and immediate effect, it prevents older treaties from neutralizing new multilateral rules.

However, Sierra call for clear rules on scope and hierarchy, transitional arrangements legal certainty to avoid disputes Sierlon is open to a rule whereby the Protocol supersedes incompatible bilateral security provisions, provided that this is accompanied by clear drafted legal certainty and appropriate transition mechanisms. For silo, we see it as a conditional, not as a default for MLI style matching system. Why this because familiar mechanisms OECD MLI precedence preserves sovereignty. Our concerns are complex opt in and out system, weeks of limited uptake by capital exporting countries and delayed benefits for developing countries. An MLI style matching system could be considered as a transitional or complementary mechanism, but should not undermine the effectiveness or universality of the Protocol.

For option four Other Sierra Leone recommends a hybrid approach. Our view on this is that primarily the Protocol supersedes incompatible bilateral treaty provisions once ratified flexibility, allow limited reservations for clearly defined articles and provide optional implementation schedules for developing countries. Backstop mechanism if a bilateral treaty is not covered or conflicts persistent, the Protocol applies directly to the extent of inconsistency. CRU supports a hybrid approach whereby the Protocol establishes a clear rule of precedence over incompatible bilateral provisions while allowing narrowly defined reservations and transitional arrangements to address legitimate country specific concerns. Any implementation mechanism must recognize the limited administrative and negotiating capacity of many developing countries.

A multilateral solution should reduce, not increase the compliance and negotiation burden SILO continues to align with the African group as we support a multilateral implementation mechanism that delivers timely, effective and equitable outcomes. Remaining silent on implementation is not acceptable. While bilateral negotiations may play a complementary role, the protocol should establish a clear rule of of precedence over incompatible bilateral treaties supported by limited reservations and transitional arrangements. An MRI style approach may be considered only as a supplementary mechanism provided it does not dilute the effectiveness of the protocol for developing countries. Thank you, Chair.


IAHWG · Co-Chair · Lisa [1:58:50]:

Thank you very much for that comprehensive explanation. Sierra Leone, that was very helpful. Sweden, please go ahead.


Sweden [1:59:02]:

Thank you, Madam Kolid. I will be quite brief. Our preliminary comment related to this topic is that we would very much prefer option number one, leaving the implementation to bilateral negotiations. We have had some challenges with the MLE solution in the past, so that would be our option. Thank you.


IAHWG · Co-Chair · Lisa [1:59:34]:

Thank you very much. Sweden, Switzerland, you may come back. But he's not here now, so he lost his opportunity. Okay, so that was the last I had. Oh, Belgium.

Please go ahead.


Belgium [1:59:51]:

Thank you. Our preliminary comment would also be like the distinguished delegate of Sweden just said before me that we would prefer to have a leave implementation to bilateral renegotiations. And on the other thing, I also wanted to add that we would also prefer flexibility within the protocol. So the, so core mechanisms and then optionality as we also see in the discussions in the other protocol. And another thing that I'm still not completely certain is how this protocol will help the countries that don't have tax treaties if there are no tax treaties, because even the FTI requires existing tax treatment treaties.

So yeah, that's just something we have to look further into, I think. Yeah, I do agree with you on that one last one, I think where you know, the flexibility that we're thinking of and the way that, you know, the objective of getting this multilateral group together is to solve various cross border services issues, one of them being, you know, the sort of half automated digital services. And I think in that area it could be particularly interesting for those who do not have tax treaties to be involved in the work.


IAHWG · Co-Chair · Lisa [2:01:32]:

But you know, it's just at this point, and I take it from several of you mentioned that we need to be flexible in order to see where this could be useful. And we need to hear from this floor, of course, what is useful. So if it's useful that we can see that it's something useful for those, although they don't have tax treaties, because if we identify that most of the problems are because you have a tax treaty, those who don't Have a tax treaty, don't have the problem. But there might be other things like, you know, type, because I don't want to use, you know, the nomenclature and I think we've said that we don't want to use that. But, you know, services, taxes on, for instance, digital services, where, you know, they are implemented unilaterally today, they may have problems and we may want to solve that in a multilateral way.


Spain [2:02:31]:

I think that's the way that we can think about it and we'll see if that's something that will fly later on. Thank you. Belgium. Oh, I got lots of countries now. Spain, por favora Delante.

Yes, thank you. Just wanted to say that this is a very preliminary point to decide on this, but we think that we support the position of Sweden and Belgium. That is the first option is the best one.

Leave for bilateral renegotiation, the issue of imperial implementation. Thank you.


Czechia [2:03:20]:

Please go ahead. Thank you. Thank you very much, Madam Chair, and forgive me, the floor. And I would also like to thank all our delegates for very interesting discussion because it shows the various interests we have in this, in this room. Just saying, preliminary point on our side, we also prefer flexibility and I think bilateral negotiations is our preferred way forward.

We also believe that we should first identify properly the scope of the problem and also the solution and then we should discuss better what's functioning, implementation, form of implementation.

And also, as was mentioned by other delegates, we also are interested in looking into the no treaty issue because we also struggle to understand better how it could work. And the last thing you mentioned about the digital services, and we also worry a little bit that if we go forward with very broad services, which probably will be the scope of the protocol, if you might end up in a very complicated, long protocol. So that's an issue we would like to flag, especially if we choose any other solutions than bilateral negotiation. Thank you. Thank you.


IAHWG · Co-Chair · Lisa [2:04:34]:

Chetya Gauna, please go ahead.


Ghana [2:04:40]:

Thank you for giving us the opportunity. Again, Madam Kohlid, I've been listening to some of the statements that are being made and I'm getting a little worried. Worried in the sense that I keep hearing we should come out with something which countries will be prepared to sign onto. Does it mean that we want a document that is diluted and doesn't say anything in order to get people to sign on to it or want something which is flexibility, which brings out the new rules that we, we want to agree on, if we do agree on them.

So I am getting a bit, because as I said, there are two categories of States, if I should put it that way. Those who have bilateral treaties, those who don't have any treaties amongst themselves, we are looking at a multilateral instrument which covers everybody. So once you sign on to it, we. Whether you have a treaty or not, you don't have a treaty, you sign on to it. It binds you in one way or the other because the protocol is a legally binding instrument as referred to in the terms of reference.

So as we carry along, as we go along, I agree we should carry everybody along. But then what kind of document do we want? One that is empty or one that can meet what we need to do. Thank you.


IAHWG · Co-Chair · Lisa [2:06:23]:

Thank you, Ghana. I think that was a very good caution that we should keep in mind. And again, that is treading carefully forward because we need to solve problems and we cannot shy away from that. Thank you. So I have.

Zambia, please go ahead.


Zambia [2:06:49]:

Thank you. Madam Khalid at Zambia, we wish to align with the statement delivered by Nigeria on behalf of the African group, as well as the interventions by Kenya, the Ghana, Sierra Leone, and other interventions from other delegates that were speaking to the same issues that were raised by the colleague. The delegates that have mentioned with regard to the question of implementation, Madam Khalid, Zambia is of the firm view that the Protocol should operate through a multilateral mechanism and should not defer its practical effect to bilateral renegotiations. As Zambia were of the view that fragmented bilateral processes would risk undermining coherence, consistency and the collective ambition of this very important work we are doing. The Protocol should be binding and capable of meaningful application in practice.

In this regard, Madam called Zambia supports the development of multilateral implementation mechanisms within the UN framework that would allow for coordinated and efficient integration of the Protocol's commitments into existing treaty relationships among parties.

In this regard, Zambda does not agree that the Protocol should remain silent, leaving implementation to bilateral renegotiations. Rather, providing for the Protocol to override incompatible bilateral treaty provisions would serve as a suitable option. As Zambia, we are of the view that absent meaningful treatment treaty integration, the protocol risks remaining largely declaratory rather than operational. Thank you, Madam Khalid. Thank you very much.


IAHWG · Co-Chair · Lisa [2:09:03]:

Sambha, I now have Estonia. Please go ahead. Estonia. Thank you. It's quite difficult to answer these questions at the moment because whether we should have a bilateral or multilateral approach would depend on what the protocol looks like.


Estonia [2:09:22]:

And the protocol would be, you know, be designed then accordingly whether we have a bilateral or a multilateral approach. We are kind of in a chicken and egg situation again. But reflecting on what my colleagues from Czechia and Ghana have said that if we are in a no treaty situation, then we definitely need a different protocol because if we are only to take into account the situations where the countries have already given up taxing rights under the existing bilateral tax treaties, then the protocol may be much shorter because the bilateral treaties would already provide the basis defining the terms, you know, who is a resident having also the dispute resolution mechanisms, et cetera. But just thinking from the taxpayer's perspective, I believe many would say that if we just had one self executing operational legal instrument that would apply across the whole world, it would be kind of a perfect situation situation. Then again, we do have the amount a MLC in pillar one that has been discussed at the OECD and this is a 300 page document, but it should be operational independently.

So again, I apologize for not giving an answer here, but it is really difficult at this stage. In general, we prefer to solve actual problems. And also in the Pillar 2 process, the subject to tax rule, we have said that we are willing to renegotiate the treaties when a developing country approaches us and sees a problem with the tax treaty they have with us. And until now we haven't received any requests. So we are safe to assume that we don't have a problem there.

So, yes, I recognize more questions than answers, but that also, I think gives some guidance for the future work. Thank you. Yeah, thank you, Estonia. I think the point is that the flexibility, but we're looking at what ways forward. There could be several ways forward and could be several ways forward for different types of services, etc.


IAHWG · Co-Chair · Lisa [2:12:00]:

And we just sort of listening to the options and the solutions that you can see is viable. And then in the end, the end, you know, the different types will have to be more specified and more into detail. But it's, I think we said earlier on, when we're talking about nexus, when you talk about methods, in the end you have to come back to nexus and it's like sort of each time we're doing that. But I don't think that's the problem. I think at least you have to have the discussion and then come back to the issues.

I have. United Arab Emirates, please go ahead. Thank you. Madam Kholid. Yes.


United Arab Emirates [2:12:44]:

As mentioned by some of the previous delegates, our view is, and we're a state with many tax treaties, tax treaties are essentially a product of negotiation between member states. And therefore we believe that treaties should be read holistically. So any amendments to the provisions of that treaty should be done through bilateral renegotiations. Thank you. Thank you very Much.


IAHWG · Co-Chair · Lisa [2:13:12]:

Germany, please.


Germany [2:13:17]:

Thank you, Madam. Thank you, Madam Kolid. I guess it goes without saying, but also in our view it is at this point in time only possible to give a preliminary assessment to assess it preliminarily. With this in mind, what we can share at this moment is that we would not be supportive of a multilateral instrument that would override or supersede existing treaty provisions. Generally, though, we would rather be in favor of having an MLI style approach that would allow contracting states to find quick solutions if the states favor the same approach, but would not have implications on those contracting states that would want to follow the other route.

Thank you. Thank you very much. Germany, Brazil. Please go ahead.


Brazil [2:14:22]:

As usual, I have not taken notes for my comments. So I apologize in advance if I'm a bit. Bit of a digression here, but it's fairly confusing for me. I'm not sure which part of the solution would be negotiated bilaterally. Maybe some parts could be negotiated bilaterally, depending on the format.

Maybe tax is covered, maybe when applying a net basis taxation, maybe some details of the implementation of net basis taxation could be agreed bilaterally because there are so many ways to have transfer pricing rules or allocation keys for transfer pricing rules. And so maybe some parts can be negotiated bilaterally, but in relation to the core part. And as I understood since the beginning of the process, the core issue here is or was that most of the problem? For me it seems that it is the situation that some countries could not have bargaining power enough to negotiate a double tax treaties with taxation of services. I'm a treaty negotiator and I have to say that even from our practice, and we have been fairly consistent in insisting to have taxation of services, it's always difficult to negotiate.

It is something that comes at a high cost to negotiate taxation of services in the treaty. So what I imagine is that for countries that have more precedents than Brazil, that is they have more tax treaties that don't have taxation of services in their treaties, it becomes increasingly more difficult or challenging to negotiate that taxation industries. So they end up in the situation that they cannot negotiate. They don't have bargaining power or maybe sometimes political pressure. Several reasons, or they just figured out later that they or the situation changed, the economic reasons changed it.

It was not relevant in the past, but it started to become more relevant. So what I understand is, is that the most of the problem, a significant part of the problem was that countries could not have taxation of services negotiated in their tax treaties. And a way to so would have a multilateral negotiation because that would change the dynamics of the parties. So competing countries would be, feel more comfortable accepting a provision that would change the situation for many countries at once. They would be less concerned with the other competing countries.

So if I, if I, if country A allows taxation of service in the source, I will be disadvantaged. But if my competing country, my neighboring country also accepts taxation of service, then, then my concern would be reduced. It would not disappear. But we would end up knowing that there is, we are moving towards neutrality and a level playing field. So my point is, okay, bilateral negotiations, maybe for some parts of the protocol, but I'm not sure that it's consistent with what we want to get here.

To allow everything to be negotiated bilaterally, maybe for the taxation on that basis, some elements or optional elements to activate and deactivate how to apply, maybe. But at least for, if we use withholding taxation, at least for some of the services or a first step in the whole approach of set of tools, then at least that part should have a floor. Then that all countries would immediately be in the same position, would immediately start from the same point and those concerns with competition and level playing field would be reduced.

Thank you. Sorry for the long intervention. Thank you, Brazil. I think the point being that what you're saying and I, you know, those who want bilateral negotiations are actually not solving the problems that we've set ourselves, you know, as. So it's like we go back to what our delegate from Ghana said about, you know, we're going to have a solution that's not the solution, you know, sort of bland paper that is not solving the problems that we've set forward.


IAHWG · Co-Chair · Lisa [2:19:04]:

And I think that is for many, perhaps not a very good solution. Way forward.

Yeah, I have two interventions from members and we have 20 minutes left. And I have 1, 2, 3, 4, 5, 6 interventions from stakeholders. So if we could do that before lunch at 1 o', clock, that would be great. So please go ahead. Switzerland.


Switzerland [2:19:47]:

Thank you. Madam Kholid, I'll be brief. Regarding the last thing you said, that bilateral does not solve the problem here, I would beg to differ with that in the sense that if we do agree on some sort of modification of taxation of services and a country does commit to implement that bilaterally, I think we do solve part of the problem. But to go back to what was said before, I agree with those who have, who have really made the important distinction between situations where there is a tax treaty or no tax treaty, and it seems like we would need indeed two different protocols. If there's no tax treaty existing we'd need a much, much longer one.

And then as we think about these different options, and in particular the MLI style instrument, it's, there's one. We have to keep in mind that there's one big difference here compared to the MLI that we. The BEPS mli. The BEPS MLI didn't have any or very little provisions and the minimum standard, no provisions that actually reallocated taxing rights. It was, I mean, the PPT rule and different procedural matters and so in a certain sense, easier to implement through a multilateral instrument.

Here we really, if we do come up with a solution where there's a reallocation of taxing rights, that's a pretty, that's a more fundamental change in the balance of a treaty. And so the situation wouldn't be exactly the same as with the beps. Mla, thank you, Switzerland, the Russian Federation, please.


Russian Federation [2:21:52]:

Thank you very much for giving me the floor, especially since this is the second time we've taken the floor. We asked for this opportunity and you gave it to us. And apologies to colleagues because we're speaking on this topic for the second time. But we had promised to return to this issue if our discussions touched upon what would happen with countries that don't have a situation with avoiding dual taxation.

So I'm not speaking on personal capacity, but as I view the solution to the problem, the countries that have agreements on avoiding dual taxation through a mandatory protocol have changed, would change the provisions of their agreements that they have that are set down in the protocol. The countries that don't have dual tax treaties also have the right to sign such a protocol. And so for with regard to those countries, the provisions of the protocol will be binding for the third countries that don't join and don't have dual tax treaties with these countries and the protocol will not be binding on them. So this is how we view a possible operation of this mechanism. What we share are concerns, concerns from some of our colleagues about the fact that this needs to be well worked out, about the fact that the mechanism hasn't been effective enough in the past and was shown to be ineffective.

So that's why we said in our first statement that we need to analyze all of the lessons learned lessons about the implementation of this particular instrument.

It said MLI style systems in the presentation, not an MLI system. So another instrument that was mentioned was the fast track instrument, the fti. And I think everyone that is familiar with that instrument, everyone should acquaint themselves with that document. And if you're not familiar with the document, I think it would probably make sense to have a look at it. That's because this document indeed was drawn up by the previous group of tax experts, which is in ECOSOC now, and which, as we see it, wasn't publicly circulated very broadly.

And there's one more point I'd like to touch upon. Again, I'm returning to another question, the question about the countries that don't have dual tax treaties.

These issues then could be resolved in the context of domestic legislation, but we think that is a monstrous step backward because the problem of dual taxation.

Won't be resolved and it will be conserved in the near and long term. So that's why we think this approach will not work, that is solving it in domestic legislation. This is not what we view as the goal of the further discussions. Thank you. Thank you very much for that input.


IAHWG · Co-Chair · Lisa [2:25:33]:

Russian Federation. Thank you. I now have no more members, so I'll turn to the stakeholders. And the first one is New York University, please.


NYU · Professor · Miranda Stewart [2:25:46]:

Yes, thank you. Can you hear me? Yes. Thank you for the opportunity to speak. Miranda Stewart, professor of International Tax Program at nyu.

And congratulations to the delegates for your serious contributions to the protocol discussion today and other days, I wanted to raise the possibility, which has been raised by some of the States, about how implementation might be managed. I believe Switzerland raised the reference to the Framework Convention. Of course, the Framework Convention is a pathway into the Protocol, and so provisions in that convention about interaction with other legal instruments are relevant and that connection should be maintained. I note the interest in flexibility, MLI style appropriate approaches. There are ways to make these approaches easier for governments and taxpayers to view, to look at synthesized texts.

Other systems for implementation can be achieved. But the main point I wanted to raise is the possibility of a hybrid solution. I think Senegal proposed this and others have mentioned it, and the possibility of introducing time frames into the protocol or a sequencing of one measure and then another. So obviously bilateral treaties cannot all be negotiated in one second. And so time frames, periods of progress or review or reporting back in respect of progress, progress seem to be relevant.

There is also the possibility of then having a default or shift into a broader or more immediate implementation of some measures. So a combination of the two. I just wanted to raise that possibility. Obviously this seems more like detail for later, but I think if the time frame aspects were considered, it might assess with the choice of implementation measures for the protocol itself. Thank you.


IAHWG · Co-Chair · Lisa [2:28:07]:

Thank you very much for that input. Yeah, I think you're highlighting the input we have now is to be able to make choices later on. So that was very helpful. Thank you very much. Ataf, please go ahead.


ATAF [2:28:23]:

Thank you. Madam Chair, I first, Ataf, want to express the admiration to some submission already made by colleagues. The one made by Nigeria on behalf of the African group and also the intervention from Sierra Leone, Zambia, Russia and a few other delegates. Madam Chair, we also want to reiterate our call on Monday that the committee would need a continued guidance from the Office of Legal Council. We take delight that some other stakeholders or delegates, especially delegate from Norway has also called for that.

Madam Chair, we believe there is value in that call. There's value because as tax people, we are not strangers to the law. But we can't purport to know the depth of the law, especially public international law, as we would get guidance from this very office. And in saying that, Madam Chair, I want to talk a bit about the substance of the discussion. We're talking about bilateral negotiation, multilateral negotiation.

Madam Chair, we are here because the challenges of digital economy and taxation of services poses a multilateral challenge. Madam Chair, you will agree with me that there are some income based on the rules that we are trying to conceive that may have sources from different jurisdictions, and these jurisdictions will be more than one. So how does bilateral negotiation help any of us in that instance? And that's why we are looking for multilateral solution. And we believe that multilateral solution will serve everybody better than bilateral negotiations.

Now, parties are here negotiating as sovereign, which also means that whatever they do not want, they can take out of the instrument. If the instrument is negotiated and the party feels that they can't sign on to it, they have options because protocols are optional, not to sign on to it. So by and large, parties that advocate for bilateral negotiation are conceiving a different problem than the problem that was set for us to solve in the torture. Now, treaty or not treaty scenarios, how do we go about it? Ataf, I've seen four different scenarios where this could play out.

And we have suggestions as to how we go about it. Number one, the two parties signs onto the protocol and they also sign onto they have a double taxation agreement. What happens? The interaction between two international instruments is not unknown to polit public international law. If you look at the law of treaties, venal conventional treaties, it is very clear as to what could happen.

And to that extent, it was one of the reasons for calling for guidance, because guidance from the Office of Legal Counsel can minimize unnecessary argument and then give us some time back. In such instance, the bilateral agreement, whether or not we have the text written in this Protocol we will only apply to the extent that is not consistent with the multilateral agreement. Now, to implement the principle agreed by parties in the Protocol, we can have a text because we know the Protocols may not be developed in the exact words and format of double taxation agreement. You may have agreed text that may be appended to the Protocol as appendix that will be adopted by parties automatically amend their double taxation agreement. It may not be as complex as the fast track instrument or as complex as the mli.

But we must have that approach to trying to implement the second scenario. Both parties are assigned to the Protocol, but they have not. They don't have double taxation agreement. In this instance. Madam Chair, it is at our belief that the Protocol being a binding international instrument, we bind the two parties.

But then it may be incoherent if the substantive rules which we expect is not imbued into the Protocol. If it's incoherent, how will it apply? It will apply. Also running on the foundation provided by domestic law of those different countries. And again, two of them are also at liberty to now have negotiate a bilateral tax treatment inculcating the principle I already agreed on in the Protocol.

The third scenario, Madam Chair, a party have signed on to the Protocol and he has a double taxation agreement with another party who has not signed on to the Protocol. In this instance, the party who has signed on to the Protocol cannot apply the Protocol on the party because it's not party of to the Convention to the Protocol. So in this instance, the double taxation agreement will continue to apply. Now the fourth scenario is where the other party at all have not signed the Protocol. I have no double taxation agreement with a party who has signed on to the Protocol.

In this instance, the domestic law of both parties will apply. And the options as to what happens to the country without treaty at all, their option is very clear. They can sign onto the Protocol or they can have a double taxation agreement negotiated with the relevant party. We believe, Madam Chair, that this represents a path to progress. And we believe that trying to subject this protocol make it a model.

Because when we say Parties should, it should provide parameters upon which party we have for the negotiation. We are literally reducing this instrument to a model. And by the spirit and aspiration of the terms of reference, Madam Chair, we believe that we were not supposed to build a model. We had to make out a binding convention for all parties. I thank you, Madam Chair.


IAHWG · Co-Chair · Lisa [2:34:29]:

Thank you. Ataf. I have stakeholder four, which I think is the Bombay Chartered Accountants Society. Please go ahead.


Bombay Chartered Accountants Society [2:34:39]:

Thank you, Chair K. For the opportunity before Just to keep it short, please, we have five minutes left. Thank you. Sure. I feel bilateral negotiation is not a way forward. What this committee is doing is nothing but negotiations.

So what happens after negotiation, you know, would be implementation. Not again the negotiation. So I'll just keep that point very short. One may say that justice delayed is justice denied. Fair allocation delayed is fair allocation denied.

We are waiting for a solution for almost 15 years. Best project started in 2012. And if you go bilateral route, it may take much more. So the solution is multilateral. The question is, do we create one more mli?

If you see what we have now, the tax treaties, we have MFN clauses, we have BEPS mli. Do we need one more document, a legal instrument on the top of it that will make it much more complicated for everyone, be it MNEs, be it consultants or be it tax authorities. So can we think of a different solution wherein we don't create a separate instrument? And that solution could be, can we add a particular article in the BAFS MLA itself? It looks, you know, little out of the box outrageous.

But that may be possible. It may appear that one is not putting one's own eggs in someone else's nest. Now, would OECD hijack the agenda? Would un. Hijack the agenda.

But practically, it may be possible. Article 33 of BAPS MLI, you know, allows parties to propose an amendment to BAPS MLI. There could be conference parties. So if all the parties agree, it may be possible to avoid one more instrument and do everything within BABS mli. And there could be Depository one, Depository two, Depository two could be a UN Secretariat which will manage this article.

We come to treaties situations where there are no tax treaties. Now, that situation can be addressed by having two simple rules in the Protocol. One, the country will restrict the taxation of services at a particular rate, which we agree here. And two, the country of residence will give credit up to the limit, which is agreed in the negotiations. Thank you very much.


IAHWG · Co-Chair · Lisa [2:36:59]:

Thank you very much for that practical last example. That was interesting. Stakeholder two. And again, with very little time, please go. Be sure.


Tax Institute Network Affairs Africa [2:37:08]:

Tax Institute Network Affairs Africa Africa Sorry. Thank you. Please go ahead. Thank you, Madam Khalid, for the opportunity to speak. So I will try and go very fast into my points.

Firstly, we believe that a significant portion of double taxation agreements are being affected by the Protocol. And our preliminary review has shown that it's at least seven articles. And indeed the Protocol is handling fundamental questions of international tax law, like nexus rules. And so for this reason, we believe that an MLI system will simply be mismatched, pun intended, to deal with the significance of amending the double taxation agreements in such a manner. Also, we believe that an MLI system will simply increase the number of legal instruments required in order to reach the the end goal.

You will have to sign and ratify at least three instruments and then opt into certain provisions within the MLI in order for it to take full effect. Additionally, one of our concerns also is that considering the conversations that are also happening under Work Stream 1, there may be more changes to double taxation agreements than what we envision in Protocol one. So, for instance, under work Stream one, we've had conversations on exchange of information as well as mutual administrative assistance, and we simply believe that the MLI will not be suitable to deal with the plethora of changes that are required in order to fully implement both the Framework Convention as well as the Protocol. On the issue of bilateral negotiations, our position is that bilateral negotiations are not enough. As stated by one of the developing countries, Brazil, the power dynamics of bilateral negotiations are actually what led us to this process.

And indeed, one of the examples that we gave in our submissions as civil society was that the uptake of Article 12A has been greatly affected by bilateral negotiations. In an IBFD study that was undertaken on 741 double taxation agreements, only 29% of those have an article on bilateral negotiation on taxation of technical services. So this shows that moving to bilateral negotiations will actually exacerbate the problem rather than resolve the problem which we're here to address. So our solution is, we really do believe that we need a treaty override within the Framework Convention as well as the Protocols, because we need to immediately address the issue of restriction of source country taxing rights. And perhaps this is one of the most controversial things to say in a room full of treaty negotiators.

But considering the changes that the Framework Convention as well as the Protocol will make, more and more we're going to see the double taxation agreements as they are right now are going to be redundant. So we also need to move with the times and envision situations whereby if a country has a small treaty network or no treaties at all, how can we ensure that the provisions within both the Framework Convention as the Protocol will be implementable for it? Thank you very much, Madam Khalid, and thank you for giving me time to speak. Thank you very much for that input. And I'm afraid, but at one o' clock we, we have to stop and they will cut our microphones.


IAHWG · Co-Chair · Lisa [2:40:47]:

So I have two more stakeholders and they will have to ask the next chair if they can speak in the afternoon when they start at 3 o', clock, but I'm afraid we have to stop now. Thank you all for your participation. I think it has been extremely useful and I look forward to work with all of you in the next couple of months to try and put things together. Have a good lunch. So, thank you all.


IAHWG · Co-Chair [2:41:18]:

I think we can. We can ask the Work stream three for, like, few minutes at the beginning of the session, just to allow for the last two interventions. Try to keep it short. Of course we will, after the permission of the colleagues, because actually it is the time for the work stream three. But we can take, I think, few minutes for the last two interventions from the civil society.

Thank you. See you after lunch.