ABSTRACT
Since the end of the World War II, Australia’s approach to regulating international tax issues has been to conclude a series of bilateral treaties, largely based on the OECD Model Double Taxation Convention on Income and on Capital (‘the Model Treaty’). To a large extent, this approach has been a great success. However, as the effects of globalisation increase the volume of transactions with international tax implications at an exponential rate, it is important to examine whether the current system meets Australia’s needs. This paper critically examines Australia’s current approach to international tax issues by examining problems with the current system and then analysing possible solutions to those problems. It begins by asking the fundamental question of whether a series of bilateral tax treaties is in fact the best approach to Australia’s international tax issues. It then identifies specific problems with Australia’s current treaties, focusing on five areas: 1 Implications of source tax reductions; 2 Categorisation of income; 3 Problems arising from the development of e-commerce; 4 Problems associated with the ‘separate entity’ principle; and 5 Treaty shopping issues.
