AN EXAMINATION OF THE DISPUTE RESOLUTION MECHANISMS UNDER DOUBLE TAX TREATIES FOR RESOLVING INTERNATIONAL TAX DISPUTES

Abstract

The purpose of a Double Tax Treaty is to promote international trade by eliminating double taxation that could arise when two sovereign countries decide to tax the same income and capital of a taxpayer under their respective domestic tax laws. Nonetheless, differences in opinion between two sovereign countries as to the interpretation and application of the provisions of the Double Tax Treaty can create an international tax dispute as to who between the two sovereign countries has the right to impose tax on the income and capital. An unresolved international tax dispute has the potential of exposing cross-border income and capital to double taxation which can undermine and discourage international trade and investment. It is in this regard that Double Tax Treaties contain certain dispute resolution mechanisms to resolve international tax disputes without necessarily going through lengthy litigation proceedings which can be uncertain, expensive and time consuming. The objective of this article is to examine the dispute resolution mechanisms under the Organisation for Economic Cooperation and Development (OECD)’s Model Double Tax Convention for resolving international tax disputes. The article also examined the resolution of international tax disputes in Nigeria.