Third Session of the Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation

Thank you, Mr. Chair. Good afternoon, everyone. Let us quickly recap. My impression from this morning's discussion is that there is broad support for the approach that has been outlined in the concept note. I also noted that some delegations have already begun moving ahead in their thinking and shared some reflections on which mechanisms could be identified as core mechanisms or which criteria should apply in doing so. Others cautioned that we should not rush on these questions. That said, another takeaway for me is that many details will need to be developed as we move forward. I think that is particularly true for the third question on how optionality could be operationalized in practice. to balance broad participation, inclusiveness, and legal certainty. With that recap, let us now resume where we left off, and that was with stakeholders. And we begin this afternoon's session with the African Union.

Thank you, Chair, for giving us the floor. We want to start by joining colleagues to thank the Secretariat, the co-leads, and the colleagues who work in this work stream. for providing the issue notes and also for the comprehensive presentation which we all witnessed this morning. African Union will like to respond to the three issues stated in this slide. I permit the Chairman to do this by first referencing to a very popular story in my village about a dancer who had a dancing competition but was talking rehearsal until the competition was over. We say this because we must in all our work stream try to avoid being this very dancer. And it is in the sense that we are committing to further elaborating certain aspect of the work. We don't oppose it, but we want to just advert our mind to the fact that we are entering 2026 and once we enter January, we have less than 24 months to finish the whole of the work. we should do what is needed to move closer to elaboration of text and language as against listing options and elaborating menus. That is very important because it's only through solid text that we can begin to see how the idea we have been advocating will look like in practice. Having said that, Chair, we believe when it comes to core mechanism, that core mechanism should be developed around MAP and MAP-like solutions. That is so because MAP by design have respect for the different sovereigns and also the domestic processes as it were. I will believe that a core mechanism build about MAP will enjoy broad acceptance and also help to move the work forward. Now what happens after the MAP has processes have been exhausted? may be subject of various alternative mechanisms, which as far as we are concerned may include mediation, conciliation and others. We want to state again that as far as our members are concerned, we are very skeptical about mandatory binding arbitration, arbitration in all its ramifications. But as we begin to elaborate the text, we can see where and how we could approach those options. Now, as to whether whatever is elaborated in this protocol will supersede existing arrangement amongst parties, we want to identify with views expressed by Sweden shortly before the break. I think it was Sweden. We definitely would not want to torpedo arrangement members already have that is working for them. But we should not also lose sight of why we are having this work in the first place, is to deepen international task cooperation with respect to dispute resolution. In that sense, we are, we will want to advocate that after the elaboration of the protocol, probably we have some additional instruments, maybe like fast track instrument that can specify and detail how the protocol may interact with existing arrangement by members. For some members, it may be the case that they just need to adopt what has been developed. For others, it may be to align what is existing to what has been developed. And for another, it may be to review what they have or to continue with what they have, if that be the options. Then on optionality, we know that the first element of optionality is the fact that the protocol by itself is optional. And that has been determined and there's nothing much we could do about it because it's been entrenched in the TOR that the protocol will have to be optional for members. But as to the optionality of the mechanism, I will refer back to the earlier comment I made that yes, we will be open to having a common mechanism which is built alongside a design that respect the sovereign of nations. But we also want to have maybe as a backstop or additional design other options which will include those mechanisms broadly acceptable to our members. Chairman, we thank you for giving us the time to have this contribution. We continue to engage as the discussion evolve. We thank you.

Thank you, African Union, for your contribution. We move on to the intervention from ActionAid International.

Excellencies, distinguished delegates, colleagues, thank you for the opportunity to take the floor. My name is Jennifer Lipenga. I speak on behalf of the African Civil Society Working Group on the UN Tax Convention and the Tax and Gender Working Group hosted by the Global Alliance for Tax Justice. Allow me to begin by reminding you that we cannot build a new global tax order on a shaky ground of existing inequalities. Article 10 of the Framework Convention and Protocol 2, as they are right now, seek to do exactly that, but aiming to fix the dispute resolution mechanisms in existing agreements, particularly double taxation agreements, rather than fixing the international tax system as a whole. We strongly caution against proposals that maintain the centrality of bilateral tax treaties or that promote systems where countries can simply choose to opt out. This further fragments the global tax systems where countries, this further fragments the global tax architecture and allows powerful states to continue to shape outcomes in their favor. These approaches mirror the system we're here to change and we cannot stress, we want to stress that existing mechanisms including the BEPS action 14 and the mutual agreement procedure and arbitration cannot be remedied by greater transparency or better arbitrator selection. They rest on unfair legal ground and on power imbalance arbitration structures and on guidelines that do not reflect realities, interests, and development needs of most countries, particularly those in the global south. Distinguished delegates, we must remember why we're here today. We're here because the existing global tax rules have been ineffective and have largely deprived global south countries of the much needed revenue to fund their development priorities. The tax rules governing our world today were built on colonial, neoliberal and patriarchal foundations. They were designed to preserve the dominance of global north countries and to reproduce the structural conditions that continue to exploit our labor, our natural resources and the unpaid and underpaid care work disproportionately carried by women. We're here to rewrite those rules, and for that to happen, we must insist that the new rules be grounded in feminist principles. They must center human rights, reparative justice, ecological justice, and substantive gender equality. With this context in mind, we would like to emphasize that dispute resolution protocols cannot ensure fairness unless the convention tackles the structural inequalities embedded in the international tax system. This begins with addressing the legal friction of multinational enterprises operating as separate legal entities. The arm's length principle, which props this position, continues to be the greatest source of disputes. Indeed, a significant amount of international tax disputes arise from transfer pricing, and this assumption cannot be fixed by dispute resolution mechanisms, no matter how well-designed they are. For this reason, Our efforts must focus on strengthening articles four and six of the UN Tax Framework Convention on the fair allocation of taxing rights, but also shift from the transfer pricing system to unitary taxation with formulary apportionment. This must be supported by an ambitious minimum effective corporate tax rate, as well as effective and inclusive public country by country reporting and automatic exchange of information. This will be a transformative step to prevent disputes that currently strain administrations, deepen asymmetries, enable illicit financial flows, and drain resources urgently needed for gender-responsive public services, including health, education, and transformative care systems. These services are also under attack due to austerity measures imposed on global south countries. As we move forward, we must remember to center on justice, human rights, substantive gender equality, and redistribution of taxing rights towards countries that have been historically marginalized. Thank you.

Thank you, AAI. The floor goes now to the African Tax Administration Forum.

Thank you, Khalid. Thank you, Chair. Good afternoon. Let me start by joining others in appreciating secretariats and the colleagues that have been working on this workstream. Definitely we have very good issues notes and of course the presentation made this morning lays a very good foundation for meaningful discussion on this workstream. On the question of optionality, I want to start by saying that this is an essential part. of this work because it will promote wide adoption of this protocol and definitely promote inclusivity, noting that there are countries with different capacities on prevention and resolution of tax disputes. And so we appreciate and welcome the idea of having optionality in this protocol. We want to align our specific comments to the comments already made by Kenya on behalf of the African group. and the subsequent comments made by Zambia, Sierra Leone, Rwanda and others and equally comments made by India much earlier. On the specific questions, starting with question one, question A there, we welcome and support the idea of fast developing a comprehensive menu of the practical and effective mechanisms for prevention and resolution of tax disputes, including determining which of those will be the core mechanism. And like some of the delegates have already noted, we have the view that the core mechanism should be those kind of mechanisms that are easy to implement by many of the jurisdictions to promote inclusivity. in our views, that kind of mechanism, uh, should only be based on existing, uh, MAP practices, those, uh, without, uh, arbitration mechanism. And this is important because many of our members have challenges in implementing arbitration, uh, mechanism, uh, including constitutional limitation, power symmetry, and cost associated to those. Uh, turning to the dispute, uh, prevention, Some of the mechanism that could be included definitely will be sharing of information starting with the country by country reporting framework, advanced pricing agreements, joint and simultaneous audits as well as compliance risk management framework. Turning to question B, we welcome the support, the proposal that these mechanisms, they should not supersede the existing mechanism, including the existing double tax agreement. On the last question, I think there is a lot which needs to be done, including agreeing on those mechanism that will form part of the comprehensive menu. And then there will certainly need to have a clear and well coordinated rules of managing the opt-in and opt-out of this mechanism to ensure that there is legal certainty and also to reduce complexity that may arise if that is not properly designed. Thank you.

Thank you, Ataf. The floor goes now to Diakonia.

Thank you, Chair.

I'm going to speak French. Sir, I'd like to thank you. My name is Douda Diop. I'm a member of the Civil Forum. the Senegalese section of Transparency International. I'm also a member of the African group of civil society organizations on the United Nations Convention on Tax Matters and a member of the Global Alliance for Tax Justice. Last week, our discussions seemed to focus on issues of form rather than substance, but they also touched on issues related to the various protocols. How does substance relate to protocols? And if we don't have this, then the Framework Convention will be pointless. Because what we're working to is to work to ensure the settlement of tax disputes, which is what we're looking at here today. My statement, which is to tackle the issues of optionality, from which states can choose, which will make things more complex and a number of undesirable mechanisms such as arbitration might be taken up. Regarding arbitration, sir, this is one of the most used mechanisms by multinational enterprises, especially when it comes to disputes with developing states. Arbitration has always been used to weaken other mechanisms such as a settlement of disputes. And truth be told, this is a Damocles sword which multinational enterprises use against developing states, for example in my country Senegal. So 120 billion tax demand which my authorities lifted against Barry's gold in 2021. Well, in this case, they resorted to arbitration and they turned to the Paris International Trade Tribunal. Senegal was requesting 120 billion and ended up getting only 9 billion after the director general of the Barry Gold Company visited Dakar before the arbitration process even ended. The process was not transparent and it undermined the tax sovereignty of my country, Senegal. This situation is not limited to Senegal around. It can be witnessed in other states, especially African ones, including Western Africa. And often in the U.S. I share the view expressed by my colleagues This protocol will remain somewhat premature as long as we have not determined its legal basis within the framework of the convention and drawn the links between this convention and other bilateral treaties. Thank you.

Thank you, Dayakonya, for the intervention. The next speaker is the Bombay Chartered Accountants Society.

Thank you, Colin. I have a minor comment. There is a confusion about what is case-by-case basis in para C. Does it mean that a particular mechanism may be allowed to MNE A, but will not be allowed to MNE B? If that is a thought process, that probably is not appropriate, that leads to discrimination amongst the MNEs. maybe a level playing field needs to be given and the option should be available to all the MNEs as against giving to a particular MNE only. The domestic law judicial precedents of a country may not be in a favor, may be evolving. Considering that MNE may want to go for a map, but if the country doesn't allow map, you know, relying on this case by this basis, that probably may not be appropriate. With the permission of the chair, I'll pass on the mic to my colleague from BCAS. He'll also make a couple of very basic comments.

Thank you, I'm Dr. Nayak. Thank you, Chair, for the opportunity and compliments for the comprehensive presentation on the issue. In my opinion, any dispute resolution mechanism should be simple. easy to implement by all countries and should be time bound. Map whether bilateral or multilateral at the option of the concerned country is the better mechanism to start with and later on other mechanisms can be included. National sovereignty and existing mutually agreed mechanism should be protected and respected by the new dispute resolution mechanisms. Optionality should be provided on a case by case basis is a Good idea. Any mechanism should be guided by the principles of equity, fairness, simplicity, clarity, and protecting taxpayers' right. Thank you.

Thank you, BCAS. We give now the floor to South Centre.

Thank you, colleagues, excellencies. Thank you for this opportunity. The South Centre would first like to commend the colleagues, the secretariat and members of work stream three for the progress made and for developing this detailed concept note. So South Centre supports the principle of optionality and the proposed approach of first elaborating a comprehensive menu of mechanisms. and subsequently identifying those core mechanisms which in principle should be available for use by all parties. These will enable countries to participate in mechanism best suited to their context. However, we wish to note that too many options may create unnecessary complexity and uncertainty. The true potential of this protocol lies in its ability to prevent disputes. And tools like joint audits, simultaneous controls, advanced pricing agreements, and cooperative compliance, they play a big role in preventing disputes between countries. However, experience shows that these tools for dispute prevention are not so much used, particularly in the developing world, where they can be a real game changer. And this evidence further shows the existing system remains inadequate for the needs of developing countries. And these are fundamental gaps that this protocol can fill. So the protocol can provide a multilateral legal framework for both developed and developing nations to work together on a universal and common legal basis and step up administrative cooperation for preventing tax disputes. So this is solely required and can generate tremendous benefits for both tax administrations as well as businesses by providing them with certainty and enhancing cross-border investment in the process. So we strongly recommend that these protocols provision regarding dispute prevention to receive maximum attention. At the same time, we also know that there is much work to be done in strengthening existing tax dispute resolution mechanisms, like the mutual agreement procedures, which has not consistently produced effective or timely outcomes. And many developing countries have had negative experiences with arbitration, especially under the investment dispute resolution mechanisms. which usually raise concerns regarding transparency, costs, and sovereignty. So further, I believe this protocol can significantly be simplified by firmly and categorically excluding mandatory arbitration from the scope of the protocol. And in other words, the arbitration of any shape or form should not find itself in the protocol because experience shows that arbitration remains costly, and often dominated by experts from a few jurisdictions and may undermine national sovereignty. Thank you very much.

South Center, thank you. We move on to Committee Catholique contre la Femme pour le Development, or CCFD in short.

Thank you, Mr. Chair. Thank you, colleagues. I'm speaking on behalf of CCFD-Terre Solidaire, member of the Global Alliance for Tax Justice, and I will deliver some overall comments on this protocol. So protocol this, protocol that. Somehow, if these negotiations had a playlist, this never-ending protocol song would certainly be at the top. Distinguished delegates, throughout this past week, we've heard your concerns, your questions, your fears. But allow me to share our greatest fear on the civil society side. The one loyal readers of the FFD Chronicle will immediately recognise an empty convention hollowed out through protocolisation. Today, as we engage discussion on Protocol 2 on disputes resolution, we must confront a basic reality. We still lack agreement on fundamental elements of the framework convention, including the fair allocation of taxing rights. We also don't know how the framework convention will interact with existing DTAs. And yet, we are already negotiating a protocol on dispute resolution without any clear multilateral legal basis. Protocols are meant to implement a convention, not to float separately from it. nor to compensate for its weaknesses. If the foundations remain unclear, no protocol can fix the cracks. At the moment, this protocol brings more questions than answers and avoids the most fundamental following issues. First, the Member States need to recognize that the current transfer pricing system is fundamentally flawed and produces long and costly disputes. Also, the Member States should support a shift towards unitary taxation backed by country-by-country reporting. The Member States should acknowledge also that opaque instruments like secret advance pricing agreements reduce the power of tax administrations and undermine national sovereignty. The Member States should also recognize that arbitration is a highly problematic tool that should not even be an option. And lastly, the Member States should avoid optionality that creates legal fragmentation, undermines coherence, and is inconsistent with UN treaty practice. Let us use this week to carefully reflect on the role of protocols, because the real danger, the one that should keep us all awake at night, is missing this once-in-a-century opportunity, delivering an empty framework convention patched later by additional protocols, would leave the world in what we call the tax jungle. Particularly for Protocol 2, we are concerned that the current discussions will only add to a fragmented landscape of competing, overlapping systems, driving unfair competitions and catalyzing more tax uncertainty. So our first duty here is to deliver a strong binding framework convention. We need to empower the COP that ensures the coherence of the international tax system for sustainable we are here to create and we need to write fairer rules that finally move us beyond a broken system. Once we restructure the system and develop a firm legal basis for the international tax rules currently being discussed, only then this resolution have meaning. I thank you.

Thank you, CCFD. We continue with the ICC International Chamber of Commerce.

Thank you, Mr. Chair. Let me first congratulate you, the colleagues, and the Secretariat for this comprehensive concept note. And once again, thank you to Kenya for the incredible warm hospitality. As you previously expressed, tax and legal certainty is of paramount importance for taxpayers across the globe, including both the global north and the global south, taxpayers from all sizes and all industries. Having effective mechanism for preventing and solving disputes is of utmost relevance. On point A, we would like to emphasize the importance of having a fully comprehensive manual of mechanism that include not only a mechanism to solve disputes, but also to prevent disputes. We believe prevention mechanism should also be considered when discussing core mechanism. On point C, we would like to highlight the importance of clearly communicating countries' decision and/or agreements on which mechanism they will have opted in, opted out, or express reservation based on the modalities that will be chosen. We also have some uncertainty on potential uncertainty deriving from case by case. But we would like to add that really clarity on communicating the country decision and agreements is of absolute importance because it is vital to know which mechanisms are available to solve disputes or prevent disputes and how to access them. And this is important not just for taxpayers, but for tax administration as well. So with that, I will conclude. Thank you, Mr. Chair.

Thank you, ICC. We give the floor now to the Committee on Fiscal Studies. University of Nairobi, CFS.

Thank you for the opportunity to speak and good afternoon to everyone. We are glad to hear of the openness to work with academia on the issues the committee is invited to discuss. Now, since optionality is generally favored, the protocol must incorporate mandatory safeguards to prevent its abuse. The principle of reciprocity in treaty law requires that when state A agrees to apply specific mechanisms with state B, it cannot arbitrarily deny equivalent mechanisms to state C facing comparable disputes. This selective application violates the good faith obligations under Article 26 of the Vienna Convention. Therefore, the protocol should include a comparable treatment clause providing that once a state accepts a mechanism with any party for a particular type of dispute, be it transfer pricing or on permanent establishment, et cetera, it creates a rebuttable presumption that the same mechanism is available to other parties with similar disputes. This preserves sovereign choice while preventing discriminatory application that would transform the multilateral protocol into a tool for bilateral forum shopping. Ensuring optionality enhances rather than undermines equal access to effective dispute resolution. Thank you.

Thank you so much. We will reconcile for a second and we'll be back in two seconds. Well, there are no more speakers asking for the floor. Therefore, we take it that the discussion on the concept of optionality has been exhausted for the time being. Let us move on to the next chapter of our discussion, so to say, and this is on the scope of the protocol. In that regard, let us also briefly recall what the focus is at this point. What we are currently seeing on the screen are the questions related to the scope. However, as was presented this morning by my colleague, just to briefly recapitulate, it was on the on the question. So question related to the concept of scope, well, the scope in general is whether the protocol is meant to focus on cross-border tax disputes only, whether or to what extent or how purely domestic tax disputes are meant to be addressed. In that regard, the proposed approach was to empowering the Conference of the Parties to develop and recommend optional future guidance and best practices. Also, when we are talking about the scope, one of the tasks in front of us is to define what constitutes a cross-border tax dispute. And also, related to the discussion on scope is the question of whether no tax treaty situation are supposed to fall under the scope, excuse me, under the protocol and not. You see questions in front of you today in the morning. We have also seen three examples that were meant to facilitate our discussions and to elaborate or explain the questions a little bit further. and the secretariat is now going to present those examples to you.

Thank you, Collette. This is just to refresh about examples because they were already presented during this morning. So what we have are three situations that we can we can agree that there would be a cross-border tax dispute. These are three typical situations. The first example is related to transfer pricing and the arms length principle. So basically country A and country B have a bilateral tax treaty whose article nine follows the UN model. Company A, resident in country A, sells goods to its corporate sibling, company B, which is resident in country B. The tax authorities of country A make a transfer pricing adjustment, increasing the price by 10 euros per unit. And the tax authorities of country B, after reviewing the case, consider that the original price was in line with the arms length principle. and therefore do not make a corresponding adjustment. So the result is a potential double taxation of the same income. The second example is a typical case of dual residency of a company. So a company which is incorporated in country A is being managed in country B. So the key management decisions are taken in country B. So both country A and country B assert that the company is resident in their jurisdiction and seek to tax its worldwide income. So the treaty has an article four that follows the UN model. And the third example is a case of foreign tax credit. company resident in country A receives dividends from its subsidiary in country B and country B levies withholding tax on the dividends and later tax authorities from country A deny the foreign tax credit on the basis that the tax in country B was not an income tax. So those are the examples and with this I give the floor to the co-lead. Thank you.

Thank you, Secretary, and thank you, Eduardo, for leading us through the examples. Let us now have a look on slide number 10, which contains the question. I have to correct myself a little bit because previously I was speaking also about no treaty situations. That is true. That is part of our discussions with regard to scope, but we take it step by step because we will later on. We have also similar examples prepared to facilitate the discussion specifically related on no treaty situation. So for the time being, the question that we are seeing right now under the letter D, those are questions that are aiming at a discussion with with the intent to define what we mean by cross-border tax dispute. So with that, the floor is open. Everyone feel free to, yeah, you are invited to contribute comments, remarks, observations on that question. The United Arab Emirates, please.

Thank you, Chair. Looking at the list that is on screen right now, those are typical scenarios which we would expect to be covered in a treaty situation in terms of disputes. I think the third one, the third bullet point down is quite an interesting one regarding the arms length principle. Like it rightly notes, Many of the transfer pricing disputes arise because of that exact reason, the differing interpretations of the arm's length principle. But I think one thing which treaties currently probably don't do so well or just currently lack the mechanism to resolve is where you've got where a jurisdiction implements essentially a safe harbour or sometimes, for example, if you take interest restriction rules, there are sort of a permanent disallowance and I don't think there's even a mechanism under current treaty sort of framework that allows for resolution of that so I think there is there is scope within this protocol and this work stream to actually try and address something which current treaties probably or current treaty Frameworks don't address so well right now thank you chair.

Thank you, UAE. The floor goes now to Switzerland.

Thank you, colleague. So first of all, we support and welcome the focus on cross-border disputes. Regarding the questions on the list, I can, in short, give you a very generic answer. And unfortunately, as often in our field, the answer is it depends. It largely depends in our view on whether there is a common legal base. There must be a substantive rule on how rights and obligations are between the parties to that dispute. So regarding the first question, the first bullet, there a rule of coordination is needed. Otherwise, the persons that are in charge of deciding such a dispute, they would have to prefer one domestic law over the other. And without a rule of order, this is probably not possible and is also not predictable. I think For example, in relation to the first case where there is a dispute under two domestic laws that both incorporate the arms length principle, there should still be something of a connection to make sure that it is really the same arms length principle. And we would clearly not oppose to develop such a rule so that we could enhance dispute resolution mechanisms in that sense. And then furthermore, one question I would like to add it to the list and it is basically who should be the parties to dispute? that should qualify as a cross-border dispute in that sense. And there I see several answers. One would be it is a dispute between states, such as a MAP procedure under a double taxation treaty. Or another possible answer could also be it should be a dispute between a state or authority of a state with a taxpayer that could be located in another state. So that would also make it then a cross-border. And I think this question is quite essential. I suppose it was also raised in the work stream discussions and it is very basic because when you talk about disputes then you are in a procedural setting and one of the first questions is of course always who has the dispute between whom. is there a dispute? And please allow me also to give you my view on this. I believe it should be only a dispute between states because states are the contracting parties to the framework convention and they should be in control of that. So, and I would also be very interested in learning other countries' views on that. Thank you very much.

Thank you, Switzerland. We give the floor now to the Russian Federation.

Thank you, Chair. We believe that the disputes which need to be settled under the protocol should be linked to the issue of double taxation. Therefore, we can rely on existing mechanisms, including the protocol. We need to rely on existing international relations. If we do not, we risk misunderstanding the applicable rules for a dispute or another. For anything else, this would be a domestic issue. We have seen a good example on previous slides. The third example seemed relevant to us because a dispute can arise in the event of a double taxation where one state might believe that this is not linked though to double taxation because it's not come under the scope of the protocol. That's an interesting example. This example shows that mediation linked to disputes regarding cross-border transactions could give rise to the possibility of a mediator providing an unreserved opinion on the nature of a dispute under the relevant international agreement. Thank you.

Thank you, Russia. We continue with Singapore.

Thank you. In our mind, a cross-border tax dispute would relate to a situation where There is a legal framework that binds the actions of two tax authorities in different jurisdictions and where there is a disagreement on the interpretation or application of the relevant provisions. So instances of unresolved double taxation, different PE determinations or residency determinations in the context of a tax treaty would constitute a cross-border tax dispute. So we would generally agree with the examples given to the extent that they are in the context of a tax treaty that covers these issues. We think there could also be a role for the protocol to play in a no treaty situation, but I'll talk more about that when we move to the next question. Thank you.

Yeah, to me it looks like it is not that easy to distinguish both questions. So whenever we start talking about cross-border tax dispute, it is either to distinguish it from purely domestic disputes or from no treaty situation. And I wonder, wouldn't it be possible for us to define cross-border tax dispute in a manner that it would, in principle, would entail no treaty situation, like we have seen the example. it does not necessarily have to mean automatically that those cases without a, you know, common legal basis, substantive legal basis would-- so that the protocol would have to apply to those automatically too. So far we have considering in the work stream and also already in August that this could be subject also to an opt-in or an opt-out. So with that, let us continue with the United Kingdom.

Thank you, Mr. Collett. Yeah, I agree with my colleague from the UEE that most of these do seem to strike me as standard treaty-based issues that would fall under the scope of cross-border tax disputes and probably within the scope of this protocol. We have been giving quite a lot of thought to how we would try to define a cross-border tax dispute. It is one of those things that is easy to recognise when you see it, but describing it in words can be quite tricky. On some of those issues specifically, I am not so sure whether or not it would be entirely theoretical. I think there needs to be at least a reasonable amount of certainty or reality to the double taxation before the protocol becomes engaged. Otherwise, we could find it being used for flights of fancy or completely dreamed-up hypothetical scenarios. Double non-taxation is interesting, again, for different reasons. That could involve two states realising that double non-taxation exists in relation to a certain transaction or a certain taxpayer. It may be that the states themselves are not in dispute, but it is really just a case of working out how to deal with it. I do not have a precise answer at the moment, but I think that those two things deserve to be separate. They could be quite different issues. On the point raised by the representative from Switzerland, I think it is a good point and I agree that the scope of the protocol should really involve state to state cross-border tax disputes. That is to say, if there is, so state A has a dispute with a company in state B, but state B does not support that company, in terms of its dispute, in terms of what it thinks is the correct answer, I do not think that should fall in the scope of the protocol. I think that it should remain state to state. Ultimately, I think that the issues listed here generally represent what we would see as being cross-border tax disputes, but in line with Singapore, assuming that there is some substantive underlying agreement. Thank you, colleague.

Thank you, United Kingdom. The floor is now Spain's.

Thank you very much, Chair. What I would like to highlight with regards to this issue is the importance of having a shared legal basis. I think it's difficult to enter into discussions on these topics, for example, depending on whether we have a legal basis. We have to really keep in mind that we are bound by our domestic legislation, therefore we need a basis. to be able to come to an agreement and to resolve issues. Without that basis, we will find it very difficult to see how we can have a dispute resolution mechanism. This is because domestic legislation in other countries cannot go against the domestic legislation in our own country. So I really want to reiterate the importance of having a shared legal basis. Thank you.

So, at risk of repeating myself a little bit and without wanting to provide the impression that I object the intervention that were made so far, I want to want us to focus on the question and the question is currently what what constitutes a cross-border dispute. The question is not at this moment whether every cross-border dispute can also be settled by that protocol satisfactorily. So this is a different question, but maybe let us try to be a little bit more disciplined for the at that stage. Let's try to concentrate on Could it be, despite the fact that there's no substantive legal basis, like a common legal basis, can it still be regarded as a cross-border tax dispute? Thank you. And with that, I give the floor to China.

Thank you, Chair. And first, we think, to answer the question first, we think that generally it seems the examples are all about the cross-border issues. And besides this, we want to share that we do think maybe it's not that easy to make a very clear definition about cross-border disputes or to read examples exhaustively. That's our opinion. And besides, if we are talking about the cross-border disputes under the scenario, where there is tax treaty within two jurisdictions, I'm wondering if we would better leave this to the existing treaty, as we suppose the cross-border issues are already covered by the existing treaty. And let's step further, if we try to make very clear definition about cross-border disputes, which is not consistent with existing treaties, there will be new disputes occurring. So that's our concern. And we are also wondering if we should not make very clear or specific definition about this. That's our consideration. Thank you.

Thank you, China. Our next speaker is Sierra Leone.

Thank you, Chair.

Thank you, colleagues. Sierra Leone welcomes the Committee's work to clarify the scope of cross-border dispute under the Protocol. We consider the proposed element appropriate as it reflects situations that often create uncertainty or risk of double taxation for developing countries. Disputes may arise when multiple tax frameworks assert taxing rights over the same income. When the arm's length principle is applied differently, or when issues of permanent establishment, residence, or withholding taxes produce mismatches, differing interpretations of tax instruments and similar situations lacking a shared legal basis also warrant inclusion A clear inclusive definition will support Sierra Leone's capacity to address cross-border attacks challenges effectively. Thank you.

I thank you, Sierra Leone, and give the floor to India.

Thank you, Goli. So I have three questions actually. On the second point, the possibility of double taxation or double non-taxation, even if largely theoretical, so as we understand, the dispute arises only when there is a conflict between two tax administrations. For example, there is an overlapping claim to tax or a contradictory interpretation or an inconsistent adjustment. So we struggle to understand how a non-taxation situation creates a dispute as prima facie it looks like there is no conflict that exists. Second point on what delegate from Switzerland has raised, who should be the parties to the dispute? So we believe these are measures, the cross-border tax dispute resolution are measures to be decided by the member states. So national sovereignty includes measures that a country seeks to allow its citizens access to as also the benefits and taxes it gives them. So we believe so the it should be the dispute between the tax authorities. Third point is in addition to who should be the parties to the dispute, it is also important that we deliberate on when a dispute arise. For example, if the, if a tax administration has raised, has did a, done an adjustment or raised a demand, which is, which results in double taxation, then yes, but, but when a taxpayer's who more to files a revised return, for example, then should we cla classify it as a cross-border dispute. So it is important to deliberate also on when, when these cross-border disputes arise. Thank.

Thank you, India, for raising these questions and at the same time translating them into statements for the further consideration. And the questions go to the plenary. So everyone, please feel invited to chip in and to answer India's questions. We continue with Brazil.

Okay, Chair.

Colleague actually.

It should be very simple to respond, to react to this slide.

So across border is a situation that is covered somehow in two countries.

So it has a connection in two countries.

In tax treaties what we usually do is to think of the four identities rule.

So we think that whether it is the same taxpayer except for.

Some specific situations, we think whether we consider whether it.

Refers to the same year, the issue at hand, we think whether.

It is the same income or fact, the objective part of the fact.

And we also consider, most importantly, whether it refers to the same tax. And we have some mechanisms to cover new taxes that are.

Significantly similar to previous taxes set forth in a double tax convention.

So I think that we need some elements here.

There is one question, at least one.

Relevant factor that I mentioned, which is whether it is the same tax or a significantly similar tax. to be in the scope of the cross-border discussion or dispute. The other elements tend to be more obvious, whether it's the same year, whether it's the same income, but at least the discussion on the same tax should also be mentioned there.

And possibly even situations with double exemption could be discussed if.

There was a potential difficulty on the interpretation of the legislation of the other country, for instance. Some decisions are taken in country A.

Assuming that the legislation in country B obeys a certain set of rules, and that could lead to double exemption.

So my point is that even in cases of double exemption, we might be.

Willing or we might have an interest in some form of resolution of tax dispute or prevention of that double.

Exemption situation.

Thank you, Chair.

Co-lead.

Thank you, Brazil, for being precise. I give the floor now to Austria.

Thank you, co-lead. I'm feeling with you and I hope that I can. I think the problem might be that when we hear the word dispute, a lot of us already have a certain concept in mind, which is the dispute between. And I think that I would agree with most countries here in the room that such a dispute can only be solved if we have a common legal basis and but we will discuss about this later. At the same time, I would also say from an Austrian point of view, this should be the focus of the protocol, but since this is probably not the only thing that might be covered in a protocol, I can understand your question why you would like to still know what a cross-border tax dispute could be more generally, in particular when we try to drill down to what kind of disputes we could cover when it also dispute, but maybe just an issue between the tax authority and the taxpayer. And here I think it's helpful the bullets that you put on the slide to because all of these are those where I would see the cross-border elements that would be kind of the question or the decisive factor if this should be a cross-border thing that we could address in the protocol as opposed to I don't know how many years of amortization you're allowed to do under domestic rules. I think here, like withholding taxes, double taxation issues are all issues that you usually have in a cross-border situation. And so maybe to conclude, I would echo Switzerland's proposal to add kind of the first question, who is addressed as who is the dispute between who occurs the dispute? Is it between states? And following from that, we have a certain type of mechanisms and certain types of disputes that might be solved. And then we have the other strand where we don't look at state to state, but other issues where different mechanisms might be required. I hope that was helpful in your, and maybe sorry, one last point. I also, the only thing here I find a bit odd in the list is the issue of double non-taxation, as others have already pointed out. I do not really see how this could. could be addressed in the same way as all the other points on the list. Thank you.

Thank you, Austria, and thank you for your understanding. Having a look on the slide and on the points, I think what those points all have in common is that in every instance it is about the application of tax rules, either law or guidance. albeit not necessarily a treaty law, but it is eventually everything is about tax rules. And the second thing, what I see as a commonality is a cross-border dimension. The question is, does this suffice? And yeah, true. I've also heard by now that some delegations are wondering whether double non-taxation scenario could constitute a dispute. It's a good one. So please chip in on that too. I give the floor now to Norway.

Thank you, Mr. Kolig. This is indeed an interesting question. We had understood the questions on the screen in the broader context of the list of questions. where question E relates specifically to no treaty situation. So therefore we had implicitly understood D to apply to situations where there is a treaty in place. But nevertheless, the concept of dispute seems to have an underlying premise that there is some kind of agreement that has not been respected. Naturally, that could also be relating to domestic law, but we think that from the principle of national sovereignty, countries are free to to decide on how they tax their residents and how they tax activities in their territory as they see fit and regularly two national systems will overlap. Now to us that wouldn't necessarily lead to there being a dispute present where there is an overlap. Countries they They deal with this usually by their rules on tax credit or exemption for foreign tax in the purely national context. But for the purpose of this protocol, we still think it's more appropriate to reserve the concept of cross-border tax disputes to a situation where there is an agreement, like a common legal basis that allocates taxing rights. and sets other parameters that this is in place. So perhaps where there is not a treaty in place, you might rather use the term cross-border issues and then deal with it in a national context. We think that all the items on the list probably could be covered. in a definition of cross-border dispute if there is a treaty in place. When it comes to the issue of double non-taxation, we think that probably that needs some further thinking. What we had thought was that this situation might arise if there was some kind of tax avoidance strategies in place and it's not easy to to be precise in those situations. And even where there is a treaty in place, there are situations where the treaty partners decide that a certain item of income should not be taxed in very specific circumstances. So it's not very easy to be precise on that. But I'll stop for now and see where the discussion leads us next. I hope that was helpful.

Thank you, Norway. I would like Nigeria to contribute next to our discussions.

Thank you very much, Michael, and thanks to the Secretariat. My contribution is going to -- I'm going to partition my contribution into two. First of all, I'm going to comment based on what we have here. in my view, what you have in bullet one, situations involving two or more national tax law frameworks providing tax and rights over the same taxpayer transaction or income. In my view, is structurally not correct. Um because as it were, you have taken taxpayer transaction or income as an element, separate elements, which is not necessarily always true. For example, you have a company in country A and probably resident in company A and also doing business in country B. There's nothing wrong in taxing that same taxpayer in both places. I think we are will be having issues if that taxpayer is taxed or that person is taxed in respect of the same income or transaction at the same time in the two places. So so it's important for us to to adjust that probably to just say taxation right over a person in respect of a transaction or income so that we know that then we are dealing with possibility of double taxation. And then the next four bullets in my view are subset of the first bullet because at the end of the day, bullet two is talking about double taxation. Bullet three is talking about arm's length principle. All of them will either result to double taxation. I think the last bullet point, again, in my view, is looking at situations where there is no bilateral treaty. I thought that you have said that this issue will be discussed further down in the presentation. Ah but that's just ehm just looking at this ehm generally ehm but I I'm looking at it beyond ah ah ah these questions. I'm I'm questioning the whole protocol itself. Ah and one of the issues that I've had on the floor is do we have a common tax tax rules? because I am of the view that working on this protocol is like a country establishing a court, appointing judges without laws. We, I'm not sure we have agreed what the tax rules will be for which we're going to use this protocol to, to, to, to resolve. Um, this put that may arise from Now, I have seen bringing you of a principle here in in one of the bullets. But under the UN framework, is there an agreement? Do we have rules that have agreed to use principle in respect of control transactions? I have seen here we have talked about permanent establishment, do we have, have we agreed under this framework, PE rules or residence rules or sharing of tax and rights rules, we can have this protocol, have all these whatever mechanism we want to put there. But I suspect that until we have the relevant protocols, establishing the agreed taxing rules or standards, this protocol is going to be largely dormant. That's my second part of my comment, just in brief. Thank you.

Thank you, Nigeria. So as it is often the case, the distinguished delegate from Nigeria alluded to a very relevant point and indeed on one of the slides. So we have previously presented that the proposed approach is in terms of scope that the protocol could apply to the range of cross-border disputes. including disputes arising from the interpretation and application of provisions in existing tax treaties. And if I understood the delegate correctly, it is also subject to our discussion, or it should be subject to our discussion, whether this is correct and to what extent this should be the case. And indeed, we should discuss it in this context. It is meant to be kind of included in the list of of the bullet, so please feel invited to also contribute on the question to what kinds of disputes like arising or stemming from what legal basis is this protocol is supposed to apply. With that, I want to give the floor now to France.

Thank you. Thank you, sir. I'm just going to limit myself to two comments, brief comments. The first, that perhaps rather than trying to positively define what a cross-border tax dispute is, this is in French, it's just simply anything that cannot be resolved through one single administration. So it's really the submission of an operation that falls within the framework of one legal system. And when it falls under two, that's when the issue arises. Legal double taxation and economic double taxation are different matters. So it might be one transaction, but it can be taxed at different points with different taxes, tax rates and currencies or even by different taxpayers. So we need to ask ourselves what we want to cover. Do you want to deal legal double taxation or all double taxation including economic double taxation? I think I'll leave it there but I would just add that I think a prerequisite is to have a shared legal basis, because if we don't have a shared legal basis, I simply don't see what we can reach agreement on. But perhaps I'm too caught up in my usual practice and we can move beyond this here in our case. Thank you.

Picking up on the last remark, I think it is our overall aspiration here to free up our minds and to think also out-of-the-box and not being stuck where we're coming from. The next speaker is from Poland.

Thank you, Mr. Collid, and thank you for these questions about the scope of the in fact, of the protocol providing for the dispute resolution mechanisms. I think my first remark would regard the issue of the dispute, yes, cross-border dispute versus domestic dispute. And I believe that here we should provide for the very precise distinction because the domestic dispute is a dispute between taxpayer and the tax authority, in my opinion, and it does not have to concern cross-border issue. And normally this dispute is of course provided by the domestic law and does not have anything with the cross-border dispute. Yes, it can have a, it can concern cross-border issue, but it does not have anything with the cross-border dispute. Cross-border dispute, of course, it is usually, it usually starts for the request of the taxpayer, but of course it is a dispute on the, between the contracting states and being precise, in fact, being the, between the competent authorities of the contracting states. not even contracting states as such because this is individual case. So the contracting authorities rather are the parties of these disputes. And so we have to set up precise distinction because between these two kind of disputes and I hope we are referring here to as far as the any procedure, mutual agreement, procedural arbitration, whatever is concerned, we refer here to the cross-border disputes, yes? And if we have cross-border disputes, this is my second remark, I believe that we need a common legal base which we can refer to. when we have this cross-border disputes on the cross-border issue. And I understand that if we are talking about this cross-border issue, we can refer to all these bullets here, almost all of them, because usually we are talking about the, of course, elimination of double taxation. but some other issues which are not directly connected to the elimination of double taxation and are regulated in some international tax treaties. Bilateral tax treaties or multilateral tax treaties, it can be, I don't know, non-discrimination, it can be double non-taxation, PPP rule, so there are a lot of issues which do not deal directly with elimination of double taxation. now. So in this context we can like we can talk about this cross-border issue which is somehow recognized during the cross-border dispute resolution procedure. Nevertheless we need a mutual, mutual, I mean common legal base because only in such a situation we can discuss about the interpretation of the provision which shares the taxation right between the countries or we set up some different rules like, for example, this non-discrimination rule or PPT rule. It must have the same basis, in my opinion, of course, rather than having this cross-border dispute on the purely domestic basis without any rules internationally, international rules which refers to the sharing of taxation rights, elimination of double taxation method or any other issue which can be covered by the international tax treaties. So I believe that in other cases when we want to try solve dispute on the purely domestic basis without any legal base, common legal base between the parties of the dispute, it would be very difficult to find a solution strictly because we would have totally different provisions. in the different countries. I mean, even if they can be comparable, like, let's say the obvious, the most like simple example like the arms length principle, theoretically is the same, but in practice it can be written down by the different countries in a different way. And we have a mutual point of reference when we want to discuss and solve dispute even on this basis, for example, yes? So I believe that, and the position of Poland rather is that we should focus on the elimination of the cross-border disputes which are somehow regulated in the international tax treaties, bilateral or multilateral. And I believe that one of these kind of treaties is also, can be also the protocols to the framework convention because they also regulate somehow, some of them at least, sharing of taxation right. So, okay, I think I stop here. Thank you very much.

Thank you, Poland. So several features have been mentioned repeatedly and I think each of them give rise to sub-questions. Maybe the first question is what we actually mean by dispute. Is it merely different opinions, having different opinions or is it something more like something else that has like a practical impact? Another question is who are the person supposed to be who are in dispute. And maybe thirdly, it is actually about the cross-border dimension. Could be worthwhile for us to distinguish those steps a little bit more if it helps us defining cross-border tax dispute. Well, Our next speaker is the United Republic of Tanzania.

Thank you, Chair. Tanzania wishes to offer the comments on the slide regarding the Ms. 30 would shape the definition of a cross-border tax disputes. We propose that the scope be limited to disputes arising from the interpretation or application of bilateral or multilateral tax treaties In this regard, first on overlap between national frameworks, disputes involving two or more national tax systems applying taxation to the same item should fall within the scope only where a relevant treaty applies, otherwise such matters remain within domestic jurisdiction. On the second point, on the risk of double taxation or non-taxation, these should be included when they are treated relatedly. On the third point, Chair, on transfer pricing and arm's length principle differences, these should be covered when arising under a treaty context. On permanent establishment, residence and withholding tax issues, these should also fall within scope based on treaty provisions. On divergent interpretation or application by tax administrations, such cases should be within scope when linked to the interpretation or application of a treaty and where no treaty, domestic mechanisms should apply. And finally, on situations lacking a common legal basis, where no treaty relationship exists, Such cases should remain outside the scope of the protocol and instead be addressed through domestic procedures. Though cooperation or exchange of information may still take place under other applicable legal frameworks. Thank you, Chair.

Thank you, Tanzania. I give the floor now to Israel.

Thank you, colleague. When I put up my flag, that was before some of the interventions, so I'll be brief because some of the ideas came up since. I think it's easier to define and decide what is a cross-border issue. It would probably involve discussion around the first bullet. We'd be discussing who the taxpayer is, transaction, income, probably types of tax and then there would be the issue of whether potential application of tax systems or actual application of tax systems but all these questions would be easier to resolve than the question of defining what is a dispute unless there is an underlying legal common legal instrument so I think the more challenging aspect and the focus of this discussion and if we were to reach agreement would be to define the dispute. Because even at the most clear cases of double taxation, for instance, if you have one state that's taxing income and the other state that would not extend foreign tax credit, the state, a state that doesn't extend foreign tax credit because that is the domestic law, would not acknowledge that there is a dispute and will be at loss for going any further. I think even under, in situations where there are treaties, so the double taxation principle, and eliminating double taxation, it's all under the rules of the treaty and only to the extent that it's not in accordance with the treaty. So the bottom line is I think it's easier to identify cross-border issues. I think it would be extremely difficult to identify disputes without an underlying tax common legal instrument. Thank you.

Thank you, Israel. The floor goes now to Portugal.

Thank you, co-leads. I will try to make some sense out of what I've been heard during this afternoon and also trying to put the ball forward. in this reflection that we are all having in respect of what are cross-border tax disputes. And I believe that what you invited us to do is to concentrate on the definition, on the possible definition of what are cross-border tax disputes and not that much in the tax disputes that will be covered by the protocol, if I got the idea correctly. I confess that I started analyzing all these examples in D, through a not very accurate starting point since I decided to read all the bullets assuming that there were in every -- all the situations were not covered by a common and shared legal base. And so at the end of that exercise, I got the idea that the existence of a common and shared legal basis would not be requisite for the protocol to be applicable but probably it should be considered a requirement of the cross-border tax dispute definition by itself. It helped me somehow discover in trying to make sense of what this situation should be covered by the protocol but not as a standalone rule or requisite that we would insert in a protocol but in the very own nature of what is a cross-border or should be a cross-border tax dispute. This is the first point that I would like to share with you. The situations that we are hearing the bullet points there are two that caught my attention. The second one, the possibility of double taxation or double non-taxation even if largely theoretical and also a bullet point that refers to the interpretation of a tax related provision. To be honest, I got, even if largely theoretical, was the most interesting part for me because it invited me to decide and to have some opinion of what is the dispute for the purpose that we are discussing here. And since we are talking about text disputes, I was somehow convinced that probably questions about interpretation or while they stay as a largely theoretical situation, they don't have a practical consequence. Probably they should not be considered cross-border tax disputes for the effects and purpose of the protocol. I pretty much believe that at the root of the dispute, it has to -- we have to find a case of application of a tax-related provision. Probably something like this would help us through. Of course, we have questions in front of us that we have to think upon to give an answer. For instance, is there any requisite in respect of the parties that are involved in the tax dispute? When do we have a tax dispute? And for this, I believe that would be useful for us to consider that probably or it's possible that the part, the parties that are involved in the tax dispute may not be the same and should not be considered the same that will be acting in the context of the resolution dispute mechanism that will be, we have, will be applying. This probably could help us to sort out and directly encounter what can be again, the element, the core element of a cross-border tax dispute for what we want. You also posed the question in respect of what should be in our view, the scope of the protocol. We believe that it should be aimed to solve disputes that are raised and do depend on the application of common share legal tax rules. be that rules contained in one of the protocols that we will be signing in the context of this framework or I admit that they are also contained in other instruments that, for instance, as we discussed during this morning, may not have an adequate dispute resolution mechanism. And I believe that it is some merits in this initiative if we are able to extend the dispute resolution mechanism that we will build up. to extend its application also to other cases where we have multilateral or a bilateral tax related provision and the core of the dispute is connected with that same rule. Thank you very much.

Thank you, Portugal. At this point, I'm going to share with you my own understanding. Speaking in any case, definitely under your control because eventually it is up to you. My understanding is that this protocol is supposed to be on cross-border tax disputes. There's nothing that we derive automatically from the terms of reference or anything but so far there has been a broad convergence that we want to exclude purely domestic tax disputes. So everything that we are not regarding as cross-border tax dispute are probably going to be purely domestic tax dispute. So when we are defining cross-border tax dispute in a manner that that it requires a common underlying substantive legal basis that would, based on my understanding, also rule out the no treaty situations, which is a little bit surprising to me because so far the proposed approach was to allow the protocol to cover those as well albeit subject to to an opt-in or an opt-out. So we acknowledge that this is something that is according to our discussions that we have had so far not going to work for all countries but there was appetite to explore it further for those who see the necessity for it. So, and we-- my understanding, so, and I just want to share it with you for us being mindful, then if we-- when defining cross-border tax dispute, one of the conditions is to have an underlying common legal basis that this would exclude the no treaty situation that we are actually wanting to discuss a little bit later with you, but kind of we have been doing this incidentally already right now. So with those thoughts, I give the floor now to Japan.

Thank you, colleague. I just wanted to comment quickly on your prior questions of who are in dispute. First of all, I agree with you that When you talk about cross-border disputes, there should be a legal basis, but I will come back to that point later. So regarding the prior question of who are in disputes, we believe that cross-border disputes, tax disputes are the disputes between tax authorities of two or more states. So I agree with others that mentioned earlier that it should be between the states. And in terms of the situations on the presentation, we think that they could all be assumed as cross-border situation. But one question I actually had was I had difficulties understanding the really last situation. If any member states have any idea of what kind of situation that is, that would be very helpful.

Thank you.

Thank you, Japan. We continue with Italy followed by Germany. Italy, please.

Thank you, Chair. Actually, co-lead. I think we broadly agree with the list we have in front of us. concerning the definition of cross-border dispute. And I am, we will focus a little bit more on the last point, on the absence of, in the absence of a legal basis, such as a a bilateral treaty, we think this, responding also to your comment before, we think this could be a way to explore the possibility of resolving such cross-border dispute even in cases where there is no treaty, there's no legal basis, provided that this legal, the protocol becomes the legal basis. So we need to define to us that there should be, we have some interest in exploring the possibility of defining a legal basis within the protocol that could serve for in cases where no tax treaty exist among parties. Thank you.

Thank you, Italy. Before giving the floor to Germany, and since it has been questioned not only once and like for example previously by Japan, At this point I would like to give you an example of how such a no treaty maybe text dispute/cross border text dispute could look like. So it is not new. You have the example on I guess it is slide number 12 but it is in principle also reflected on slide 9, I guess. Could we please see the examples? Yeah, or any case. So what you see here, the second example, it is the very same thing that you have seen previously on the ninth slide. The only difference is that we had in the previous example, we had an additional sentence according to which country A, country B, that there is a tax treaty between both countries that follows Article 4 of the UN Model Tax Convention. So this sentence is deleted here. So we have a situation where a company incorporated in country A manages all its key decisions from country B, and both countries claim full tax residence and tax the company over its worldwide income. So this is meant to provide an example of how possibly what could trigger a dispute And I hope that, we hope that this gives a little bit more clarity of what we are talking about. The three examples are the very same. So it is not the only one, so I focus on it because it is, my view, the shortest one and easier to grasp, but all three examples are actually the very same with the difference that there's no underlying substantive legal basis. So I give the floor now to Germany. Germany for the time being is the last member state asking for the floor. Following Germany we would continue with the stakeholders after an intervention by my co-lead but we give the floor first to Germany.

Thank you very much, Ko Leet. I also wanted to try to add some thoughts to the no treaty situation, because we heard in the work streams that there is a need for that by state which lack like a big treaty system. And we are open to further discussions. Firstly, I want to underline that in our view all tax treaty issues should be included and that the protocol should not be limited to disputes arising from the application and interpretation of the framework convention or the protocols, but now to the main point, the no treaty system. It is as of now quite unclear how a no treaty dispute resolution mechanism could look like, but it might be something and then maybe like a bigger extent like Article 25 paragraph three, second sentence of the UN MTC that allows for an exchange of the CAs in order to find solution in individual cases of double taxation. And we believe that we could deal with the further discussions on that topic in a way maybe that stage which possess more information or kind of have more expertise, could share more thoughts, maybe also in something like a focus group or a task force to determine whether we could really create some guidelines on this topic or even like provision or something. Thank you very much.

Germany. Okay, thank you, Germany. All right, before we give the floor to Singapore, listening to the interventions, I just I just want us to reflect on why this protocol was considered to be important. So currently what we have is a system where we have bilateral treaties, in most cases, which the dispute resolution mechanism that is provided is the map article. However, over the years, countries have complained that the MAP process is not serving its taxpayers. And businesses have also been complaining about the complexities, the long waits to have these matters resolved through the MAP process. That was one of the issues that gave rise to the consideration of this protocol. There are also situations where countries who do not have a robust treaty network and in that respect do not have a way to resolve their cross-border issues, then those should also, then there should be a mechanism by which those persons, those countries would be able to access a way of resolving their cross-border disputes. And so I would like to give an example coming from a jurisdiction where we have a multilateral treaty called the CARICOM double taxation agreement in which there is no map article. In a case, and we have cross-border disputes, in that case what happens is that you're only mechanism is to resort to your local court and we recently had a case where there was a dispute between Trinidad and Barbados called the Methanex case and in that because there was no map article there is no map article in the treaty the only option was to go through the domestic tax process which eventually ended up in the Privy Council which is the apex court of Trinidad. That decision now has binding effect on cases on on countries where the which are signatories to the Caricom treaty and are also bound by decisions of the Privy Council. And so there are in fact countries, they may not be speaking, they may not be present in the room, but they have to be given consideration as well because this is supposed to be an inclusive process. So what the protocol is aiming to do is to improve where we can on the current process where there is a legal basis such as a treaty and where there is no legal basis but countries have to resort to their domestic laws in order to resolve the dispute. Ultimately, what we are trying to do is to provide, and although we don't use the words tax certainty in this forum, What we are trying to do is to improve the process for taxpayers. Ultimately, that is what we are trying to recognize, the rights of taxpayers and providing a system by which their disputes can be resolved in a timely, simple, efficient, and effective manner. Now, I'll give the floor to Singapore.

Thank you. Thank you for giving me the floor again. I think it would be useful to move beyond what the term cross-border tax disputes means in a technical sense and focus instead on what we think the protocol should cover. And we think could be a no treaty situation or many no treaty situations where the protocol could play a role as I mentioned previously. Now the examples raised specifically on different application of the arm's length principle gives rise to disputes between the taxpayer and both tax authorities individually. Now the question is whether both states should have the avenue to to engage on a voluntary basis to resolve any double taxation that arises. And I agree with Italy that the protocol itself could provide the legal basis for this to overcome any domestic legislation and it could only be activated only if both states agree to do so for a particular case. I mean, if you want to maximize the optionality. And I think it could be useful to states which do not have a wide treaty network, but nevertheless could benefit from such resolutions of cross-border issues. Thank you.

Thank you, Singapore. To me, that is a clarification of your previous intervention, so thank you for this. I don't know how one would call that animal. So far I have been thinking that cross-border tax dispute would be kind of the header of the protocol, but yeah, thanks for the clarification. We exhausted now the list of speakers from the member state. We move on to stakeholders and we start with the African Union.

Thank you, Chair. Chair, we want to come back a bit to weigh in on the discussion we have had so far. We start by stating that as far as we know, this protocol should serve as basis for resolving dispute when those disputes have arisen and not basis for the dispute to arise themselves. And why there's clear difference between the two is that dispute arise necessarily from the operation of substantive tax rules. The protocol is procedural in nature to the extent that it provides mechanism and procedures for resolving dispute. It cannot be the basis for those disputes that arise themselves. And you go back to a key example given, like the one given by Jamaica, there is already a common basis. That common basis is the CARICOM instrument. So if they do not have dispute resolution mechanism, they as a people could adopt the protocol. And it applies because there's common legal basis. But if otherwise is the case that there is no legal, common legal basis like double taxation agreement or maybe a dispute emanating from the protocols, which I will have to speak to, because if we develop protocol number one, that becomes a common legal basis for parties to that protocol from where dispute can arise. dispute could also arise from future protocol that we signed together and that will all be within the scope of this protocol. But where there is no legal basis at all, including the instances that were given in slide nine, we do not believe that this protocol should seek to cover those elements. And why so? Take for instance the second example, A company have equivocate their place of management and their place of residence in a manner that two jurisdiction claim, have claimed to tax that very company. Each jurisdiction will go to their domestic law to determine whether by their domestic law they have rights to tax that company. And where the two jurisdiction could be right at the same time, and they could apply taxes. if it is a problem then the company should be able to arrange its business in a manner that that confusion will not arise so that could be more like a deterrent could this protocol be used to resolve that dispute in practice how could that happen would the protocol mandate any of the countries to change their domestic legal framework I don't think it's within our scope to do that so by and large we think there are two major areas where dispute can arise which could be subject of resolution under this protocol number one is existing double taxation agreement especially the ones that do not have dispute resolution mechanism or the one that have decided party where parties have decided to adopt this very protocol Number two is a bit aspirational because the obligations and the terms are yet to be elaborated, which is protocol number one and subsequent protocols that could emerge from the framework. Number three, which we may have to consider carefully, is dispute that may arise between parties resulting from interpretation of the convention itself. Why I think we think about it more carefully is because parties have indicated interest that this could be resolved under the convention instead of under the protocol. Otherwise that is a third element where dispute can possibly arise with parties having common legal basis for that dispute to arise. So these are our early thoughts about these processes and we want to really advise that we do not extend the scope of the convention to cover instances where there is no common legal basis including treaties and other instruments. We thank you.

Thank you African Union. The floor goes to the Bombay Chartered Accountants Society.

Thank you, thank you, Kholoud. This is a very stimulating discussion and, you know, feeling happy to be a part of this discussion. Just thinking what could be the situations where the tax authorities of two countries can have a direct dispute. I would say in most cases, the dispute is always between a taxpayer and the tax authorities. Without a taxpayer, can there be a dispute between two authorities? That's a question mark. Now, having said that, I did attempt to figure out some situations. One situation may be where the countries, when one country does not exchange information, which is requested by another country, that's an example of a direct dispute between two countries. Another could be, let's say when the countries are preparing a synthesized text of a tax treaty, you know, influenced by BEPS and they disagree on the interpretation of MLI and then that disagreement is documented and this has happened in the synthesized text of India UK tax treaty. Is that a case of, you know, dispute between two countries, so between two tax authorities directly, the officer sitting in the room, you know, may want to contemplate all the situations in which they need to interact with each other and the situations in which the dispute could arise. I feel it may be difficult task to list all the elements of a dispute or to list all the types of disputes. An alternative approach could be defining the tax cross-border dispute not with respect to the elements of dispute, but with respect to the parties who are involved in the disputes. So the proposed definition could be a cross-border dispute is a dispute where tax resident of one country is aggrieved by the tax treatment faced by it in other country, where the tax administration of one country believes that the conduct of other tax administration is not consistent with the agreed standards of a treaty or any other instrument. So this may be the definition of a cross-border dispute. Uh, I, I'm, I'm not sure, uh, you know, how the dispute between two countries, two authorities will be settled out, but that's, that's for the, I mean, that's, that's some solution which we are looking at. Uh, otherwise we may want to issues like whether the disputes related to the digital services tax will be covered by the protocol. DSTs as we understand are, you know, kept outside the tax treaties. So that, that may be one area which, uh, the committee may want to consider whether the disputes related to pillar two would be considered, you know, that I would see is a bigger, uh, lion or a leopard in the room. If I don't give credit only to the elephant of big five, because soon this disputes will come up and we'll need a solution as to how do we address this disputes. Can the disputes related to interpretation of MLI itself? can be seen as a cross-border disputes. Thank you.

Thank you. Our next speaker is from the Global Policy Forum Europe.

Thank you, Chair, for the opportunity to speak. Distinguished delegates, I'm speaking on behalf of Global Policy Forum Europe, which is a member of the Global Alliance for Tax Justice. I would like to raise awareness to our concern that the discussion on scope is premature at this stage of negotiations, as emphasised by other colleagues. In our view, it doesn't make sense to fix the roof before building the house. The type of tax disputes we will be dealing with in the future very much depend on decisions taken in the convention itself on a fairer allocation of taxing rights. Civil society has been pointing out for many years that the level of judicialization in cases of international taxation has become very high and has been growing due to the subjectivity of the rules on allocation of income based on arm's length principle and transfer pricing. These ineffective and dysfunctional rules have been exploited by multinationals to avoid taxes. This is the main source of uncertainty in the tax compliance process and the increasing number of tax disputes. Consequently, the best way to provide certainty for potential taxpayers and tax administrations alike is to develop a new approach to the allocation of income of multinationals for tax purposes based on the economic reality that they operate as unitary enterprises under central ownership and control. In other words, if we get things right in the convention itself, It will save us a lot of time talking about dispute resolution. I'm German and I know that Germans are not generally famous for their good sense of humour, but there's a common German joke saying, why keep it simple when you can make it complicated? The discussion on scope seems to be following this logic. As civil society, we kindly urge you, please keep it simple and make use of the advantages of unitary taxation. Thank you very much.

We have heard GPEF Europe and I align myself with the joke that we have just heard. We give now the floor to the Global Initiative for Economic, Social and Cultural Rights.

Thank you, colleague. Excellencies, distinguished delegates, colleagues, my name is Roseline Onyango. And I speak on behalf of the Global Initiative for Economic, Social and Cultural Rights and the Global Alliance for Tax Justice. The current framework for resolving cross-border tax disputes is fragmented, costly and fundamentally skewed in favor of those with the most resources who are the corporate actors and historically have been the developed countries. Mechanisms like bilateral arbitration and the mutual agreement procedure are often underutilized due to high cost and a severe lack of transparency in process and outcome. In relation to your questions under the scope of cross-border tax disputes, all the situations you outlined from double taxation or non-taxation to transfer pricing disagreements, permanent establishment determination, conflicting treaty interpretations and disputes without a shared legal basis should be covered within this protocol. But more importantly, the protocol should prioritize preventing such disputes long before they escalate into costly procedures. The framework convention should focus on dispute prevention and should only touch on dispute resolution in situations whereby dispute arise from its interpretation. The most effective way to reduce disputes is not to manage them better but to prevent them from arising. We urge a commitment to adopting unitary taxation with formulary apportionment. which inherently reduces disputes by simplifying the allocation of taxing rights and eliminating many conflicts arising from transfer pricing within the framework convention. Transparency is also one of the key ways to level the playing field, resolve information asymmetries and stop disputes before they require lengthy, costly resolution procedures. However, transparency alone is not enough. It remains unclear what common legal ground this protocol is based on that addresses the objectives and commitments of the terms of reference for the convention. The protocol risks embedding the current existing fragmented international tax system rather than being based on a solid foundation for a new system for the fair allocation of taxing rates. Tax disputes that result in lost revenue are not merely commercial setbacks. They are a direct attack on a state's fiscal space and its ability to realize economic, social, and environmental rights. Every unresolved case jeopardizes finding for essential public services like education, health, and social protection. In conclusion, let us not create a protocol that is merely an incremental improvement of existing failing systems. Let us create one that reflects our shared ambition for global tax justice, grounded in prevention, fairness, and the protection of human rights. Thank you.

Thank you, GI, ESGR. The floor goes now to the African Tax Administration Forum.

Thank you, colleague. Thank you, Chair. This is an important discussion, first and foremost, and I would like to start by saying that in our view, cross-border tax disputes are largely tax disputes that will arise from cross-border transactions that involve more than one jurisdiction. And on that basis, we can appreciate the listing here that is in front of us would cover most of those situations. save for the concern that is already raised about the situation of double non-taxation, which we'll agree with. So there will be typical issues such as application of transfer pricing methodologies in different ways, definition of permanent establishment, attribution of profit, double taxation, and so forth. this listing sort of makes sense to us as to what would constitute a cross-border tax dispute. However, as others have already commented on to whether the protocol should cover situations where there is no treaty, we'll also want to weigh in into that situation. In our view, we don't think that is correct because there is no legal basis or common basis upon which a dispute would arise if there is no treaty, and therefore extending the protocol would create practical challenges. And I'll give you an example. We have situations where countries have different definitions of permanent establishments. different rules of attributing profits to those permanent establishments and therefore if there is no common basis, particularly a treaty that governs that, then it would be very difficult to say that then there is a dispute arising in those situations. Same analysis would apply also to transfer pricing, even if countries typically will say we apply arms length standard, they actually nuances in some of those rules, the way they are domesticated, and therefore if there is no commonality in terms of simple things like what methods are used, the approaches used in determining profits in certain complex situations, then all those difficulties are very difficult to agree on if there is nothing which is bringing all parties together in form of a common legal basis. And for that reason, therefore, we do not support this protocol extending to those situations where there is no treaty. However, to the extent the framework convention definitely will have certain substantive articles that speak to new tax rules like allocation of taxing rights and maybe similar approaches, then any disputes that will arise within the framework convention, then perhaps this protocol could also cover those. if the framework convention does not have a dispute resolution mechanism for those kind of issues. Thank you, Chair.

Thank you, Atav. I give the floor now to the Institute of Development Studies.

Thank you very much. I would just like to share two questions or observations with regards to the last two points. First, if it could be relevant to have a discussion on what is the scope of the different bilateral or multilateral instruments with tax related provisions that could be covered by this. Most of the discussion was on bilateral tax treaties, but there are potentially many more existing agreements that have tax related provisions, for example, the convention mutual administrative assistance or I think there are transport agreements on taxation of airlines, for example, whether it's the intention that the protocol would apply to disputes under such instruments. And then on the second question on the no treaty situation, that echoes, I think, a bit the point of the Bombay chartered accountant situation on, for example, if pillar two, treatment under pillar two could be such a dispute. I think there might be situations where the domestic laws of countries sometimes make assumptions about the laws of other countries, for example granting a foreign tax credit if the foreign tax is an income tax, or perhaps having a certain treatment if the tax of another country is could be considered as a harmful tax practices or as like as a low tax regime without substance. So if it could be relevant to think about solutions or ways to have a discussion between the different countries and in such situations and we are just thinking that it could be potentially considered this as dispute even though there is no shared legal basis. Just as food for thought, I don't necessarily have an opinion whether that should be covered under this, but that came to mind.

If I understand the IDC correctly, we would have to consider what we mean by tax treaty in addition to all the other questions that we have been dealing so far and this, will probably add another aspect to the conundrum. I give the floor now to the Committee on Fiscal Studies followed by the ICC.

Thank you, Corley. I will start by saying that CFS agrees with BCAS's submissions and raises the same questions. Now, the discussion has leapt to dispute resolution without really establishing the prior obligation to prevent disputes themselves from arising. Now, this is not merely a sequencing matter, but it reflects a fundamental principle in international cooperation law. States must exhaust prevention mechanisms before resorting to formal dispute resolution. The Vienna Convention's Article 26 is clear. The obligation to perform treaties in good faith extends to preventing breaches, not merely remedying them after they occur. The protocol must therefore establish prevention as the primary obligation with resolution serving as a secondary mechanism when prevention fails. This reflects the principle of subsidiarity in international law, where more intrusive measures should only be deployed after less intrusive ones have been attempted. Prevention is where the greatest efficiencies lie. Disputes that never arise impose no compliance costs on taxpayers, no administrative burden on revenue authorities, and no diplomatic friction between states. Prevention also upholds Fiscal sovereignty more effectively than resolution itself because it allows States to coordinate their tax positions before either has made a unilateral assessment that must then be defended or retracted. So the prevention mechanisms must address the same scenarios that would otherwise become disputes. If we accept that transfer pricing adjustments, permanent establishment determinations and residents questions constitute cross-border tax disputes, then prevention requires advanced mechanisms for these exact issues. This means the protocol should mandate advance pricing agreements with multilateral application, binding advanced rulings that competent authorities rather must recognize across jurisdictions and consultative procedures before making determinations that affect another state's tax base. So the legal architecture that we see coming out of this, it requires three distinct tiers. The first tier will comprise mandatory information exchange and transparency obligations that create the conditions for prevention. States cannot prevent disputes about transfer pricing if they lack information about comparable transactions or the taxpayers global value chain. The automatic exchange of country by country reporting, country by country reports, For instance, it serves prevention by giving both source and resident states simultaneous access to the same information, reducing asymmetry that breeds conflicting assessments. Then the second tier, it will establish or it should establish proactive cooperation mechanisms. And these would include simultaneous tax examinations where both jurisdictions audit the same taxpayers simultaneously rather than sequentially. Joint risk assessment frameworks that identify contentious issues before they crystallize into actual adjustments and advance consultation procedures that require competent authorities to confer before making any determination likely to affect another state's tax base. So the obligation here, it must be framed as mandatory consultation with good faith. negotiation and not merely discretionary cooperation. The International Court of Justice already has jurisprudence on procedural obligations in international disputes, which establishes that genuine consultation requires each party to listen in good faith to the other's concerns and genuinely consider modifying its position. Then finally, the third tier comprises binding advanced resolution mechanisms. Now, these differ from ex post dispute resolution because they prevent the dispute from materializing rather than resolving it after it arises. So bilateral and multilateral advanced pricing agreements fall here as do binding rules on treaty interpretation for specific fact patterns. The critical legal point is that these mechanisms must produce outcomes that bind both tax administrations and have effect before either makes a formal assessment. This requires states to accept that their fiscal sovereignty includes the obligation to constrain their own taxing powers prospectively when coordination is necessary to prevent disputes. And perhaps you will guide me, maybe the intention here is to discuss all this as substantive features of the framework convention and not necessarily as part of this protocol. Thank you.

Thank you, CFS. The next is the ICC.

Thank you, Mr. Chair. So in terms of companies' experience, we have consulted our members and we see cross-border disputes indeed arising from both situation covered by treaties and in absence of treaties. Based on our members' experience, disputes can be effectively resolved where the tax authority has a clear framework in which to operate to resolve these disputes. be it legal basis, capacity, et cetera. However, in many countries, solving cross-border disputes efficiently and effectively can still be quite challenging where there's no treaty. And in such circumstances where no treaty is available, businesses must depend on local dispute resolution mechanism, such as administrative appeals, litigation, or unilateral adjustments in order to resolve these conflicts. And these are overall slow and costly. Such remedies are often inconsistent, and may not always yield satisfactory results or be resolved. And failure of this mechanism can significantly increase the risk of double taxation. As a consequence, the lack of tax treaties, specialized and effective dispute resolution processes, and rule clarity, these all may render jurisdiction considerably less attractive to businesses due to these tax uncertainty and therefore financial tax risk. In the spirit that this protocol should not only cover dispute resolution but also dispute prevention, prevention instruments in the situation of the lack of absence of treaty can be particularly beneficial. This mechanism can create an environment of stability and trust within the tax system, encouraging investment and supporting proper tax risk management for both the benefit of tax administration and taxpayers. So we were trying to also think about possible examples. So for instance, we were thinking of the possibility for a taxpayer to seek a synthetic, what we call synthetic APA, which could involve obtaining two unilateral APAs that are coordinated in a way that could look like a bilateral APA. The protocol could also add immediate value, even in non treaty jurisdiction, if it includes a baseline administrative cooperation channel between competent authorities on specific cases. that is paired with time-bound reviews windows. Also in this case, to give possible examples, this could be the situation where a counterparty jurisdiction documents an adjustment, the risk double taxation, and in this case, parties should be required to grant temporary standardized unilateral relief until the resolution of the dispute, so when the resolution is still pending. Another option could be developing an MAP light or multilateral framework agreement that provide basic procedures, including short initial review periods, short resolution targets, template documents, documentation, and the possible escalation to dispute resolution entities. We could also think of other options like light touch ombudsperson that is adopted in some jurisdiction, helpdesk function, this could triage non treaty disputes and steer them to early mediation. This could also be potentially an option to be considered. Ultimately, just to conclude, is whether we decide to cover one or another disputes under the definition is the fact that the dispute will persist, will arise, and we need effective ways to solve those disputes that might arise in treaties and non-treaty situation.

That was quite an abrupt end of the intervention. Thank you, ICC. We give the floor now to BCAS, who is asking the floor for the second time, but we have no further speakers requesting the floor. So BCAS, please.

Thank you for this opportunity. In addition to the points made by my colleague, we would like to add one more important point, and that is a dispute arising out of unilateral change of laws by one country, which will result in denial of tax treaty benefits. should also be addressed by the new protocol. Thank you.

Thank you, BCAS, for flagging this scenario. It appears that this topic, the question on how to define cross-border tax dispute have been sufficiently discussed, at least for the time being. We have 30 minutes left. It appears that the question scheduled actually for the next step has been addressed in the course of our discussions too. That was the question on no treaty situations. There is one question left dealing with purely domestic disputes. However, we colleagues would rather not rush through this question but instead give the Chair the floor to wrap up today's session. Thank you.

Okay, thank you everyone.

I noted that you didn't get any coffee break this afternoon.

We are sorry for this, but I think the discussion was very good.

That's why we continue till the end with no breaks.

So I think we are done for today.

We don't have any other requests for the floor, so we're going to close today.

And we'll convene again tomorrow in the same room at the morning to continue the discussions and go again.

Through the rest of the presentation with other different topics with our two colleagues. I would like to thank the colleagues for their effort and for their great contribution in this process.

Before we close, I would like to bring the attention of everyone that tomorrow afternoon will be a closed meeting.

So tomorrow afternoon at 3:00 is a closed meeting.

Uh, for member states only, and thank you, and have a good evening, and looking.

Forward to see you tomorrow morning.