Tax Treaties Will Remain Bilateral: OECD Tax Chief

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By Alex M. Parker

Tax treaties will likely continue to be primarily bilateral despite a recent multilateral pact signed by 70 nations, according to the OECD’s top tax official.

“I don’t believe in a multilateral instrument replacing all of the bilateral treaties,” said Pascal Saint-Amans, director for tax policy and administration with the Organization for Economic Cooperation and Development. Instead, the instrument will “streamline the implementation of multilateral tax treaty-related measures.”

The OECD tax chief spoke Aug. 30 during a panel at the International Fiscal Association congress in Rio de Janeiro.

Multilateral Treaty

The OECD announced in June that 70 countries plus Hong Kong signed the multilateral instrument in Paris, which will amend over a thousand existing bilateral tax treaties to implement changes from the organization’s base erosion and profit shifting project. The changes included new standards for recognizing a permanent establishment, as well as rules to prevent companies from abusing treaty privileges.

Double tax treaties set out parameters between two jurisdictions for taxing multinational corporations. While aiming to prevent double taxation, they have come under fire in recent years for allowing too much income to go untaxed in either jurisdiction.

Saint-Amans said that while the MLI was only meant to implement BEPS, he could foresee nations in the future using it, or a similar mechanism, to implement future multilateral tax changes.

“In spite of the title, this could and should be used in the future regarding changes in the model tax convention,” he said.

Can’t Slow Down

Mike Williams, business and international tax director for the U.K. Treasury, said it will probably be hard to put the multilateral genie back in the bottle.

“Once you’ve shown that you can speed up, why would you want to slow down again?” Williams asked, speaking at the same panel. “Not everything can be solved bilaterally.”

Consolidated Texts

While the MLI amends existing treaties, it was not intended to produce a single consolidated treaty, OECD officials said—although some countries, such as Sweden, have explored using that option as they implement the changes.

“Countries are at liberty to do what they want,” Saint-Amans said. “I think most countries will opt for some form of comments on their treaty explaining what the impact has been.”

Maikel Evers, the OECD official who lead the MLI project, said that for certainty, taxpayers will likely need to consider both the original treaty and the multilateral agreement.

The MLI “does not come in at a textual level,” Evers said. “That will make it slightly more difficult, or less legally accurate, to produce consolidated texts.”

“So consolidated texts would, in most cases, be for reader’s guidance,” the OECD official said. “If you wanted legal reality in applying the MLI, you always need to look at both the bilateral treaty, and the MLI that’s alongside or even on top of that.”

The MLI will take effect when at least five nations have both signed and ratified it. The U.S. hasn’t signed the agreement.

To contact the reporter on this story: Alex M. Parker in Rio de Janeiro at

To contact the editor responsible for this story: Kevin A. Bell at

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