MACROECONOMICS, TRADE AND INVESTMENT MACROECONOMICS, TRADE AND INVESTMENT EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT Using New Data to Support Tax Treaty Negotiation Martin Hearson Marco Carreras Anna Custers ABSTRACT This paper introduces the new Tax Treaties Explorer dataset, developed with support from the World Bank and the G-24, and illustrates its use for research by tax treaty negotiators, policy makers, and researchers. The new dataset provides a rich source of data to reexamine existing tax treaty policy, inform negotiation positions, and assess treaty networks. For the first time, it provides a tool to analyze trends in the content of tax treaties, across individual agreements, over time, and between countries. To illustrate the value of such an approach, we replicate a study by Barthel, Busse, and Neumayer (2009), which found a positive association between the presence of a tax treaty and the bilateral stock of FDI. We show that this effect is mainly driven by the withholding tax rates in the treaty rather than by other provisions affecting taxing rights such as permanent establishment. If the outcomes of this proof-of-concept replication are borne out in future research, this would suggest that negotiators can seek the maximum protection of source taxing rights in other parts of the treaty, knowing that this is unlikely to dilute investment-promoting impacts. © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO. Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content—The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third- party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@ worldbank.org. 4 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION >>> Contents 1. Tax Treaties: A Global Policy Issue 7 2. The Role of Data in Tax Treaty Making 10 3. A New Tax Treaties Dataset 13 4. Historical Legacies, Current Trends 17 5. Replication Study: Tax Treaties and FDI 29 6. Conclusion 33 7. Appendix A 34 8. References 35 >>> Acknowledgements Martin Hearson: Institute of Development Studies, Brighton, UK, m.hearson@ids.ac.uk; Mar- co Carreras: Institute of Development Studies, Brighton, UK, M.Carreras@ids.ac.uk; Anna Custers: World Bank Group, acusters@worldbank.org. This work was funded by the World Bank through the Global Tax Program Trust Fund. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank and its affiliated organizations or those of the Executive Directors of the World Bank or the governments they represent. We thank Vincent Arel-Bundock, Chiara Bronchi, Patricia Ann Brown, Ana Cebreiro Gómez, and Norbert Roller for their review, inputs, and guidance. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 5 8. MTI INSIGHT >>> Using New Data to Support Tax Treaty Negotiation >> TA X T R E AT I E S : A G L O B A L P O L I C Y I S S U E Bilateral tax treaties are intended to create a stable and attractive tax environment, encouraging trade investment while providing revenue authorities with tools for mutual assistance and dispute resolution. There are over 3,000 such bilateral tax treaties. However, these negotiated agreements can also limit states’ ability to tax income earned within their borders by investors and service providers from the treaty partner, often referred to as their “taxing rights.” They affect the taxation of most cross-border activity, which makes up an estimated 80 percent of foreign direct investment (FDI).1 > > > P O L I C Y D E B AT E O N T W O F R O N T S Broadly speaking, policy debates concerning tax treaties divide into two major categories. The first concerns the misuse of treaties to obtain benefits not intended when they were concluded, principally by “treaty shopping” via investment hubs. Public debate about tax avoidance over the past decade—in tandem with the work of the Group of Twenty (G-20) and Organisation for Economic Co-operation and Development (OECD) on base erosion and profit shifting (BEPS)— has led to changes in tax treaty norms designed to prevent the treaties from being exploited in this way. Second, questions are arising as to whether the revenue costs of curbing taxing rights are justified by any gains. Such questions are relevant both at the level of norms embodied in multilateral model treaties and when considering the bilateral treaties that countries negotiate in practice. Illustrating this concern are changes to model treaties such as the new Article 12A and proposed Article 12B of the United Nations (UN) Model Double Taxation Convention between Developed and Developing Countries (“UN model”), as well as the proposal under consideration in the OECD/G-20 Inclusive Framework on BEPS (IF) to create a “new taxing right.”2 The tension here is typically styled as a compromise between the taxing rights of the “source” (capital and service-importing) and “residence” (exporting) jurisdictions (Brooks and Krever 2015; Eyitayo- Oyesode 2020). In many cases, however, curbs on source taxing rights accrue to multinational investors rather than to residence country governments (Zolt 2018). 1. The estimate covers the period 2014 to 2018. Javier Garcia-Bernardo, personal communication, September 21, 2020. On file with the authors. 2. The UN Model “seeks to assist countries in drafting and negotiating bilateral tax treaties, with a view to maintaining the de- sired balance between obtaining more tax revenue from foreign investment and preserving [an] investment-friendly climate, in support of their development goals” (Trepelkov 2014). The new Article 12A refers to “Fees for Technical Services” and the proposed Article 12B to “Income from Automated Digital Services.” USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 7 > > > P O L I C Y- D R I V E N N E E D S F O R D ATA Yet what is in doubt is the extent to which any such gains These policy debates have exposed a growing gap in the justify the revenue forgone by the source country (Leduc and availability of policy-relevant data and research. The demand Michielse 2021). As noted tax lawyer and scholar Eric Zolt for such analysis is threefold. argues, tax treaties are a form of tax incentive and should be analyzed using the same tools (Zolt 2018). To that end, >>> NEED FOR TREATY DEVELOPMENT AND there are two sides to the equation: costs and benefits. It has REVISION become relatively common to estimate the costs of restrictions on dividend and interest withholding, usually in static terms, but First, governments are reexamining their existing treaty with some estimates that take into account behavioral change networks and developing treaty policies, spurred on in part by (Balabushko et al. 2017; Janský and Šedivý 2018; McGauran growing attention from campaigners (ActionAid 2016; Alencar, 2013). Aside from cost estimates that focus on the presence Avan, and Olwenyi 2020). In Africa, treaties with Mauritius or absence of a treaty (Beer and Loeprick 2021), there have have been terminated by the governments of Senegal, been no other attempts to quantify the costs of various treaty Rwanda, South Africa, and Zambia. Argentina and Mongolia provisions such as permanent establishment (PE) definitions. are among others to have terminated treaties with investment hubs in recent years. The Netherlands signaled a willingness As for the benefits, a wave of recent scholarship (discussed to renegotiate its tax treaties with low- and middle-income in section 2 of this paper) has deployed network analysis countries (LMICs) and to take a more flexible approach in techniques and microdata to attempt to measure the real areas such as withholding tax (WHT) rates, while Ireland investment-promotion effects of particular treaty provisions, issued a public consultation on its treaty policy toward lower- including in regard to treaty shopping. Again, these attempts income countries. have so far been largely limited to dividend and interest withholding and to FDI. Thus, when countries make decisions The age of many lower-income countries’ treaties with OECD about tax treaties, they have precious little evidence countries is especially of concern given the improvements to concerning the costs and benefits of other restrictions on their treaty norms in recent years. Half the tax treaties in force in taxing rights. lower-income countries today are more than 20 years old, and one-tenth were concluded before 1980—when the first >>> NEED TO BUILD NEGOTIATION CAPACITY UN Model Tax Convention was published—and have not been updated since. A handful of these even predate the Finally, lower-income countries need more easily lower-income country’s independence from colonial rule. It accessible data to strengthen their capacity for negotiation is a significant task to analyze an aging treaty network and and renegotiation. The publication of a revised UN Manual for determine the best course of action, and countries will need the Negotiation of Bilateral Tax Treaties between Developed to identify the highest-risk treaties on which to focus as well and Developing Countries (UN 2019) and the Platform for as the realistic potential for improvement based on precedent. Collaboration on Tax’s “Toolkit on Tax Treaty Negotiations” (PCT 2021) are examples of the renewed focus on this >>> NEED FOR COST-BENEFIT ANALYSIS topic, as is the provision of technical assistance through Tax Inspectors Without Borders.3 At the regional level, bodies such A second need for new data is to offer countries better as the African Tax Administration Forum (ATAF) and the Inter guidance about the potential costs and benefits of tax treaties. American Centre of Tax Administrations (CIAT) have invested For most lower-income countries, the constraints on taxing in tools and training for their members in treaty negotiation, rights are a straight revenue cost in static terms, mitigated and the number of regional model treaties is growing. by the hope that the treaty will stimulate investment and in turn increase welfare and expand the tax base. Competition Still, some lower-income countries continue to negotiate and to attract inward investment has clearly motivated decisions to renegotiate costly tax treaties. For example, in recent years conclude tax treaties (Barthel and Neumayer 2012; Hearson Benin, Burundi, Equatorial Guinea, The Gambia, Guinea, 2021), and some research suggests that treaty shopping may Mauritania, and Nigeria have concluded treaties that eliminate create added pressure on countries to revisit their tax treaty all or most WHT rates. Kenya’s 2012 treaty with Mauritius policy and therefore to negotiate new agreements to take back was struck down by its High Court following a challenge control of their fiscal policy (Arel-Bundock 2017). from civil society organizations (Ogembo 2019) and has now 3. Tax Inspectors Without Borders (TIWB) is a joint initiative of the OECD and the UN Development Programme (UNDP) to support countries in building tax audit capacity, with a focus on multinational enterprises’ compliance. For more information, see the TIWB website: http://tiwb.org/. 8 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION been renegotiated in a much stronger form. Zambia’s now- The next section discusses the state of knowledge on tax terminated treaty with Mauritius had been signed as recently treaties in LMICs; introduces the dataset in section 3; and as 2011. Stronger, data-driven analysis will help countries to presents some initial descriptive findings, illustrating how develop tax treaty policies that stipulate whom they will negoti- the data might be used, in section 4. Section 5 includes a ate with, on what terms, and how to establish their positions replication study that demonstrates how the dataset can help and prepare for negotiations, including by analyzing precedent to refine existing knowledge about the impacts of tax treaties. (Mutava 2019). Starting from the model of Barthel et al. (2010), which finds a relationship between tax treaties and FDI, we replace the >>> CONTRIBUTIONS OF THIS PA- binary measure of the presence of a treaty with indexes PER from the dataset. This tentative analysis suggests that more residence-based treaties exert a stronger positive impact This paper introduces the new Tax Treaties Explorer on FDI but that this effect is driven by lower withholding tax dataset—developed with support from the World Bank and (WHT) rates, not by other treaty provisions. the Intergovernmental Group of 24 on International Monetary Affairs and Development (G-24)—and explores some of its insights regarding these three data gaps. Building on prior work published by ActionAid and the International Centre for Tax and Development (ICTD) (Hearson 2016), the new dataset captures 28 clauses, most of them reflecting the balance between source and residence taxation, across almost every tax treaty signed by low- and middle-income economies. This dataset enables, for the first time, broad comparisons and analyses between countries and over time for over 2,500 treaties plus amending instruments. It offers the potential for new research into the impact of specific treaty provisions beyond dividend and interest withholding taxes. The dataset is accompanied by an online tool (available at http://www.treaties.tax) that acts as an accessible entry point to understand treaties in comparative context. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 9 >> T H E R O L E O F D ATA I N TA X T R E AT Y M A K I N G > > > B E T T E R D A T A , B E T T E R T R E A T Y • They encourage a focus on quantitative treaty POLICY AND P R E PA R AT I O N FOR provisions at the expense of others that may be just as N E G O T I AT I O N S pertinent. • Their utility as tools for quick-reference comparison Data are essential to underpin a strong negotiating position. frequently break down when rates are stratified in ways not Precedent in a country’s own treaty network, that of its captured by basic templates—for example, if there are multiple negotiating partner, and trends in treaty negotiations more rates for different types of royalty. broadly can all either reinforce or undermine a position. As • The variations in wording found across many treaties the Platform for Collaboration on Tax’s Toolkit on Tax Treaty mean that a simple search for specific terms in a treaty’s Negotiations notes, even before negotiations begin, “a text cannot reliably establish the presence or absence of a country’s decision to negotiate a tax treaty should be based particular provision. on an analysis of the . . . [other country’s] recent tax treaties in • Taxing rights may be established in places other than order to identify the main elements of its tax treaty policy” (PCT those indicated by the model treaties—including protocols 2021, 7). For example, the United States will not agree to a tax attached to treaties at the time of signature, or protocols and sparing clause—a “deal-breaker” preventing negotiations with other amending instruments concluded at a later date. some LMICs (Brown 2020). And although the United Kingdom once routinely offered an article on withholding taxes on fees Purposive interpretation across many treaties and articles for technical services to lower-income countries, in recent therefore requires a significant investment of time. years it has refused to do so (Hearson 2017). Guidance on treaty negotiations points to the importance The absence of an open database of coded treaty content of preparing for negotiations by reviewing one’s own recent means that the exercise of tabulating common standardized treaties, as well as those of the treaty partner, with countries in variations in treaties has been performed repeatedly by similar regions or income groups (PCT 2021, 19; UN 2019, 28). researchers, duplicating effort and inevitably leading to partial Furthermore, outside of negotiations themselves, countries analyses that are usually focused on only one or several are increasingly seeking to review their existing networks to countries or clauses (Brooks 2010; Daurer 2014; Daurer and identify vulnerabilities and opportunities to strengthen them. Krever 2012; Hearson and Kangave 2016; Li 2012). (For more Because many lower-income countries currently lack policies comprehensive coverage, see Wijnen, de Goede, and Alessi on tax treaty negotiation, such reviews should strengthen the 2012; Wijnen and de Goede 2013.) process of treaty making and the outcomes of negotiations (Mutava 2019). Although academic research often employs a heuristic that any capital- and service-importing country will seek to retain Data availability—or the lack thereof—imposes constraints as many source taxing rights as possible during a negotiation on governments and other stakeholders who are attempting to (Chisik and Davies 2004; Rixen 2011; Rixen and Schwarz analyze treaty networks, whether their own, those of potential 2009), the picture is more complex. Examining countries’ treaty partners, or those of their neighbors and competitors. actual treaty networks shows a wide variation in the content Although treaty texts often can be obtained from government of tax treaties negotiated within the current parameters. For websites, they are not always easy to find and may not example, Daurer and Krever (2012) demonstrate that African be translated into an accessible language. Subscription countries’ treaties are less source-based than those of Asian databases have more comprehensive coverage, but access countries with the same treaty partners, while Li (2012) shows may be prohibitively expensive. In any case, the analysis of an evolution over time in the negotiated content of China’s a large number of treaties requires specialized knowledge treaties. and can be time-consuming. Studying the network of each current and potential treaty partner rapidly becomes a major Hearson (2018) suggests that power asymmetries and lack challenge. of negotiating experience both translate into greater restrictions on source taxing rights. Analysis by the International Monetary Some information, most commonly on WHT rates, has Fund (IMF) suggests that treaties are more likely to include a been extracted from treaties and made available in a quick- provision on capital gains on shares deriving value indirectly reference tabulated format by various organizations, but such from immovable property if one of the signatories is a resource- data have downsides: rich or low-tax jurisdiction—and that such provisions are more 10 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION common as the difference between the two jurisdictions’ tax • More precise sources of data. Although aggregate rates on capital gains increases (PCT 2020, 33). FDI statistics can still produce interesting findings, studies increasingly use bilateral FDI data or firm-level microdata. LMICs’ preferences can be observed in a variety of sources, The latter may be preferable since bilateral FDI data have including the contents of regional model treaties, and in coverage and accuracy issues, especially for lower-income published disagreements with provisions of the OECD and countries. regional models (Vega and Rudyk 2011; West 2021). We might • Salient features of home countries’ taxation of foreign presume that these observed variations in preferences reflect income. Consideration of these features may have a material a combination of countries’ tax policy priorities at the time impact on the gains to investors from tax treaties. Credit of signature as well as learning and capacity development, systems and controlled foreign company rules, for example, political motivations, and the power dynamics of negotiation may soak many of them up, diluting treaties’ impact on (Hearson 2018; Kangave 2009; Mutava 2019). investment to these countries. • Models’ focus on indirect investment structures. > > > A D R I V E TO I M P R O V E R E S E A R C H Whether for tax treaty shopping or otherwise, recent literature ON COSTS AND BENEFITS shows the use of network analysis to identify the most cost- effective pathways for firms to repatriate income before and A most basic observation about the academic literature after a direct treaty is concluded between two countries. To on tax treaties is that the findings concerning the costs and do this effectively, it is necessary to consider the attributes of benefits of tax treaties are inconclusive, especially in the case potential conduit jurisdictions’ tax systems, as well as of their of lower-income countries. Studies of the impact on FDI during tax treaty networks. the 2000s produced a mixture of positive, null, and negative • Consideration of treaty attributes rather than just a results (Sauvant and Sachs 2009). binary variable—that is, whether the treaty exists or not. To date, most studies attempting to estimate the investment >>> IMPROVED APPROACHES effects of tax treaties have either disregarded the content of the treaty altogether or focused on dividend WHT rates. A few have In recent years, this picture has changed as researchers also considered WHT rates on interest and royalty payments began to develop ever more sophisticated models (Table 1). as well as “tax sparing” clauses. As noted in the Platform A review of these studies points to several attributes in which for Collaboration on Tax’s toolkit, current methodologies to new approaches improve on their predecessors: estimate the revenue forgone from tax treaties are also limited to restrictions on dividends, interest, and royalties WHT (PCT 2021, 9). USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 11 > > > T A B L E 1 - Studies of the Relationship Between Tax Treaties and Investment Since 2010 STUDY TYPE OF DATA HOME COUNTRY TREATY TREATY CONTENT CONSIDERED TAX SYSTEM SHOPPING Treaty binary Azémar and Darmaphala (2019) Bilaterial FDI Yes Yes Tax sparing clauses Baker (2014) Bilateral FDI No No Treaty binary Balabushko et al. (2017) Microdata n.a. (Ukraine) Yes Dividend, interest, and royalty WHT Treaty binary Beer and Loeprick (2021) Aggregate FDI No Yes Dividend WHT Interest WHT Treaty binary Blonigen, Oldenski, and Sly (2014) Microdata n.a. (US) No MAP (inferred) Dressler (2012) Microdata n.a. (Germany) Yes Dividend WHT Hong (2018) Bilateral FDI No Yes Dividend WHT Treaty binary Marques and Pinho (2014) Microdata Yes No Dividend WHT Mintz and Weichenrieder (2010) Microdata n.a. (Germany) Yes Dividend WHT Petkova, Stasio, and Zagler (2020) Bilateral FDI Yes Yes Dividend WHT van ’t Riet and Lejour (2018) Bilateral FDI Yes Yes Dividend WHT n.a. Treaty binary Weyzig (2013) Microdata Yes (Netherlands) Dividend WHT Note: FDI = foreign direct investment; MAP = Mutual Agreement Procedure; n.a. = not applicable; WHT = withholding tax >>> STRENGTHENING RESEARCH TO BENEFIT may affect investment decisions, including other WHTs, PE LMICS definitions, and capital gains taxes as well as the benefits that accrue from having any tax treaty at all, regardless of its terms. How can this body of research be strengthened to the benefit of negotiators from lower-income countries, so that they can Second, while network analysis has permitted a focus on maximize the benefits gained while minimizing the revenue investment diversion via conduits, it should be remembered forgone? Eric Zolt summarized the key questions in 2018: that the key concern for a capital-importing country is how to increase its total stock of inward investment as well as how While the traditional focus has been on whether to maximize the revenue from that stock. For example, one developing countries should enter into tax treaties with interpretation of research by Beer and Loeprick (2021) is that developed countries, the better questions may be what aggregate FDI in an economy increases, albeit alongside form the treaties should take and with whom developing declining tax revenue, when firms can minimize tax costs countries should enter into treaties. (Zolt 2018, 147) through treaty shopping. Balabushko et al. (2017) also find a behavioral response from reducing or increasing WHT rates To answer these questions, we first need better data and in treaties. econometric techniques. The recent publication of studies that consider some salient features of potential treaty partners and Third, research to date has largely concentrated on FDI, the impact of certain treaty articles is a positive development. a choice that is certainly logical. The impact of some treaty Yet, where studies have considered dividend withholding provisions may be felt elsewhere, particularly on portfolio alongside the impact of treaties as a whole, the latter has an investment, trade in goods and services, transfers of independent effect, indicating that other aspects of tax treaties intellectual property, and movement of people. contribute to their investment effects (Marques and Pinho 2014; Weyzig 2013). Conversely, Azémar and Darmaphala Fourth, the welcome inclusion of attributes of home country (2019) find that only treaties with a tax sparing provision had jurisdictions could be expanded to consider attributes of any impact on investment. A next generation of research host countries. Several cross-country studies have already should consider the costs and benefits of other provisions that attempted to use host country WHT rates, but the key challenge 12 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION Itatent eaquam volorae quiatur sus sit modipsa ndanda dolorerchil imil mos quis eri te dolut fuga. Sin nus ut miliquam \At qui dolorer ibusam que mod qui ut que velectem que eum volut abo. Hendae entiunt aut reratius, coribus nume eum simodignis as delitae nat ut am id estrum que et harcia et, auditiscium qui sequamusa conseditiam solupta tinctatur? dolorrovit, optis quia ipsae modigende conesectia coribusda Qui offictiorro volestis re exeris resteca borrorum laut experer nobit porum quam, cone liquodi tatibusant odignatin et officat ferunt okdedped. vitiundusam, totaquo ea ex ex et occuscipsam intur? Obissitis maxim aut illa qui berum si doluptibus cusdam Sedia quam nitectem fugiatus, quiduciis ent ut voluptas iuntur simus id entiatent re odicte voluptatem quam et, eossinus dolupta debitem et qui occuptatur mos etur, to volorib quiatibus ditati sime omnimus. eatibus volorio. Tas ad estem qui offici idelest reptatur aceaqui >> A N E W TA X T R E AT I E S D ATA S E T During 2019 and 2020, a dataset was assembled comprising the large majority of those items listed in the Platform for 2,533 bilateral tax treaties, 8 multilateral tax treaties, 272 Collaboration on Tax’s toolkit (PCT 2021, 13). bilateral amending instruments, and 687 modifications through the OECD/G-20 Multilateral Instrument to Implement > > > A DVA N C E M E N T S REFLECTED Treaty-Related Aspects of BEPS (MLI).4 As far as possible, I N T H E TA X T R E AT I E S E X P L O R E R the Tax Treaties Explorer dataset includes all treaties signed D ATA S E T by 118 countries: those that are, or were until recently, LMICs; all countries in Africa, and all members of the G-24.5 Lists of This new dataset builds on the ActionAid Tax Treaties treaties were compiled from the International Bureau of Fiscal Dataset, published by ActionAid and the ICTD and discussed Documentation (IBFD), supplemented with governments’ own in an ICTD working paper (Hearson 2016). Benefiting from lists published online. feedback on the ActionAid dataset and support to develop the revised dataset from expert advisers and other stakeholders, Most tax treaty negotiations use as their starting point the the new dataset represents three main improvements on the OECD Model Tax Convention on Income and on Capital previous one: (“OECD model”) and UN model tax conventions, and almost all treaties follow a structure based on these models. • Much wider coverage. The dataset incorporates five Treaties based on the OECD model generally impose greater times as many treaties as the earlier ActionAid Tax Treaties restrictions on a country’s ability to tax inward investment, Dataset and uses a larger sample of LMICs—a concerted whereas the UN model makes amendments to the OECD effort to code older treaties that were previously omitted model that leave more of these rights intact. In the Tax because they did not follow the structure of the OECD Treaties Explorer dataset, each of the fields (table 2) is based and UN models—and includes amending protocols and on a provision of the model treaties—whether the provision multilateral treaties. Feedback from revenue officials in represents a difference between the UN and OECD models, francophone lower-income countries, for example, stressed a clause that is in both models but does not always appear in that including colonial-era treaties that are still in force, as well negotiated treaties, or a value that the models leave open to as regional multilateral agreements, was essential to provide bilateral negotiations. a comprehensive picture. Nonetheless, some treaties are still uncoded, either because the text was not available in English, The dataset was developed in consultation with an advisory French, or Spanish, or because they were so different in group of tax professionals, some of whom were experienced content and structure from the modern-day model tax treaties treaty negotiators. Of particular importance, it includes that coding was impossible. 4. Data in this working paper apply to version 2.0.4. of the dataset. Check https://treaties.tax/data for subsequent updates. 5. The full list of economies whose treaties are comprehensively included in the dataset is as follows: Afghanistan, Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bangladesh, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Burkina Faso, Burundi, Cabo Verde, Cambodia, Cameroon, the Central African Repub- lic, Chad, China, Colombia, the Comoros, the Democratic Republic of Congo, the Republic of Congo, Côte d’Ivoire, Djibouti, the Dominican Republic, Ecuador, the Arab Republic of Egypt, El Salvador, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Gabon, The Gambia, Georgia, Ghana, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, India, Indonesia, the Islamic Republic of Iran, Iraq, Jordan, Kenya, Kiribati, Democratic People’s Republic of Korea, Kosovo, the Kyrgyz Republic, the Lao People’s Democratic Republic, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Maldives, Mali, the Marshall Islands, Mauritania, Mauritius, Mexico, the Federated States of Micronesia, Moldova, Mongolia, Morocco, Mozambique, Myanmar, Namibia, Nepal, Nicaragua, Niger, Nigeria, North Macedonia, Pakistan, Papua New Guinea, Paraguay, Peru, the Philippines, Rwanda, Samoa, São Tomé and Príncipe, Senegal, the Seychelles, Sierra Leone, the Solomon Islands, Somalia, South Africa, South Sudan, Sri Lanka, Sudan, the Syrian Arab Republic, Tajikistan, Tanzania, Thailand, Timor-Leste, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkmenistan, Uganda, Ukraine, Uzbekistan, Vanuatu, República Bolivariana de Venezuela, Vietnam, West Bank and Gaza, the Republic of Yemen, Zambia, and Zimbabwe. A few of these countries are not mentioned in the dataset because they had not concluded any tax treaties as of January 1, 2020. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 13 • Alteration of the provisions covered to focus on the threshold for the recipient’s share of ownership that qualifies most pertinent business taxation provisions. In particular, the for the lower rate. Some treaties have three or more rates or WHT rates for interest on loans from financial institutions, use a different type of eligibility criterion for the lower rate. copyright royalties, and royalties for the use of equipment are all now included as separate fields in addition to the main An online code book explains how the most common variations rates for these two categories. were treated.6 Some coding errors and inconsistencies may • Development of an online interface. Users can interact remain, although the double coding approach should limit with the data directly at http://www.treaties.tax. Experience their number. Where they persist, this will usually be because with the ActionAid dataset indicated that manipulation of the both coders made the same error, which is especially the case Microsoft Excel file was a barrier to access for many users. where treaties contain nonstandard wording. To ensure accuracy, each treaty was coded twice, Certain important clauses are also missing entirely from the independently, by two different members of the project team. dataset because of the wide variation in drafting that makes Coders were recruited from universities with master’s degree it hard to code reliably. One example involves “tax sparing” programs in law, and they were either recent graduates or provisions within the article covering double taxation relief, current students who had completed courses in tax treaty law. which significantly influenced many negotiations by LMICs The coders’ early work was comprehensively checked until and have been found in one study to affect flows of investment they achieved a satisfactory level of accuracy. (Azémar and Dharmapala 2019). The dataset also uses a purposive interpretation, which In addition, despite the aim of purposive interpretation, means that coders were asked to take account of the intention coding rules based on the model treaties could fail to capture of nonstandard wording rather than simply checking for the the interaction between provisions included for consideration presence of specific phrases. Guidance on how to code and others that may have a similar effect if drafted in a common nonstandard formulations was prepared with support nonstandard way. Nonstandard wording also inevitably leads from the advisory group, and coders were asked to flag any to some subjectivity in the interpretation of treaty provisions. nonstandard clauses for verification of their interpretation. The Wherever possible, guidance on these issues was flagged agreement rate between coders after initial data cleaning was in advance in the guidance given to coders or was applied 95.4 percent. Disagreements and queries were then resolved retrospectively if issues arose during spot checks. by the project lead, consulting with the advisory group. For example, WHTs on technical service fees (Article 12A) > > > C AV E AT S A N D L I M I TAT I O N S are usually provided for in stand-alone articles but may be included within the royalties article. In the latter case, they It is worth discussing several caveats and limitations to the may simply be incorporated within the definition of royalties or dataset. To begin with, claims about provisions of individual included as a separate paragraph later on. They may also be treaties drawn from this dataset should always be checked provided for through a protocol appended to the treaty when it against the treaty text, because the dataset is designed was concluded, with no mention in the main body of the treaty for high-level comparisons rather than to give a precise or at all. comprehensive account of the legal position. Other caveats to keep in mind when using the dataset are coding limitations Another example involves Article 13 (capital gains), for and the absence of domestic tax considerations. which the dataset includes fields related to the inclusion of paragraphs 4 and 5 (respectively, gains on a “land rich” >>> CODING LIMITATIONS company and gains not in that category). This assumes that, following the UN and OECD models, this article defaults to The coding structure eliminates nuance and heterogeneity residence taxation. In some cases, however, the article by coding each provision with a single word or number. This defaults to source taxation, in which case paragraphs 4 and approach is appropriate because the dataset deliberately 5 may not be required for the source country to have a taxing includes treaty provisions that appear uniformly in most right over the income concerned. In cases such as these, the treaties, but there are sometimes exceptions. For example, code book online indicates how values have been captured. the dataset gives two dividend WHT rates as well as the 6. See https://www.treaties.tax/files/tax-treaties-dataset-coding-book.pdf. 14 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION >>> ABSENCE OF DOMESTIC TAX CONSIDERATIONS which treaties either prevent or limit to a maximum rate. These are Articles 10 to 12A of the model treaties. Each of the four As discussed earlier, much useful analysis of tax treaties types of payment (dividends, interest, royalties, and technical requires consideration of countries’ domestic tax systems, service fees) receives equal weighting, but within each type, which the dataset does not incorporate at this stage. For the values in the dataset are averaged. example, the WHT rates in the dataset are absolute values. Yet • Index of other provisions: includes the remaining a 10 percent maximum in a treaty may result in considerable fields, drawn from Articles 7, 8, 13, 16, and 21 of the models. forgone tax revenue for a country whose domestic rate is 20 • UN index: employs a strict analysis of only the percent, whereas it would have no impact on revenues for a provisions that vary between the UN and OECD models, as country whose domestic rate is 8 percent. they stood in 2017. It excludes, for example, WHT rates (since these are not specified in the UN model), but it does include Article 13, paragraph 4 (gains on a “land rich” company), can Article 12A (“Fees for Technical Services”) or an equivalent facilitate the imposition of capital gains tax on indirect transfers taxing right. Shipping, where the UN model gives two options, of assets but only in the presence of appropriate provisions receives half weighting. in the domestic tax code (PCT 2020). Conversely, in certain cases, domestic antiavoidance legislation or jurisprudence Beyond the calculations described above, the indexes might allow for an extensive interpretation of a treaty in the based on the dataset do not employ any weighting strategy. absence of a paragraph such as 13(4). Defending the right to impose certain taxes will be much more important to some countries, at certain points in time, than to Of course, the sacrifice of taxing rights is the same regardless others. It is impossible to take this into account, and so the of domestic law. A country with an 8 percent WHT rate today indexes do not attempt to establish a hierarchy of provisions. may have had a higher rate in the past, just as it may want Consequently, the indexes provide high-level comparisons to increase its rate in the future. Likewise, a country with no that point to trends meriting further investigation. capital gains tax at the time it signs a treaty may subsequently introduce one. > > > I N D E X E S T H AT S U P P O RT T R E AT Y COMPARISONS As well as using the dataset to look across the detail of negotiated tax treaties, it can also be used to amalgamate a treaty’s content into expressions of its overall protection for source taxing rights. These indexes are useful, albeit rough, starting points for treaty comparisons. To create them, each clause in the treaty was assigned a value between 0 and 1, where 1 represents a greater taxing right over inward investment. Indexes are the averages of these values over a particular group of clauses, as follows: • Index of source taxing rights: incorporates all fields in the dataset that relate to the balance of taxing rights. It is calculated as the average of the PE, WHT, and “Other provisions” indexes. It gives a high-level overview of the treaty. • Index of PE definition: includes fields related to PE, which refers to the threshold above which a foreign company’s presence in a country becomes taxable. It is drawn from Article 5 of the model treaties. • Index of WHT rates: averages the WHT rates in each treaty. These are taxes imposed on cross-border investment, USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 15 > > > T A B L E 2 - Tax Treaties Explorer Dataset Fields, by Index DEFINITION ARTICLE (PARAGRAPH) ARTICLE (PARAGRAPH) MODEL TREATIES Index: PE Definition 5(3)(a)C Construction PE Length (Months)* 5(3)(a)S Supervisory Activities Associated with Construction* 5(3)(b) Service PE Length (Months)* 5(4)(a) No Delivery Facility Exception to PE* 5(4)(b) No Delivery Stock Exception to PE* 5(5)(b) Stock Agent in PE* 5(6) Insurance Broker in P* 5(7) Dependent Agent Extension to PE* Index: WHT Rate 10(2)(a)Q Qualifying [FDI] Dividend WHT Rate (%) 10(2)(b) Other [Portfolio] Dividend WHT Rate (%) 11(2) General Interest WHT (%) 11(2)F Interest WHT Rate Applying to Loans from Banks and Financial Institutions 12(2) General Royalties WHT Rate (%) 12(2)C Royalties WHT Rate Applying to Payments for Copyright (%) 12(2)E Royalties WHT Rate Applying to Payments for the Use of Equipment (%) 12A Management or Technical Service Fees WHT Rate (%)* Index: Other Provisions 7(1)(b&c) Limited Force of Attraction* 7(3) No Deduction for Payments to Head Office* 8(2) Source Shipping Right* 13(4) Source Capital Gains on “Land Rich” Company* 13(5) Source Capital Gains on Shares Other than those Covered by 13(4)* 14 Independant Personal Services Included* 16(2) Source Taxation of Earnings by Top-Level Managerial Officials* 21(3) Source Taxation of Other Income* Excluded from Indexes 10(2)(a)T Threshold for Qualified Dividends 25B(5) Mandatory Binding Arbitration 27 Assistance in Tax Collection 29 Entitlement to Benefits Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: The dataset’s overall “Index of source taxing rights” is a high-level overview of taxing rights, calculated as the average of the PE, WHT, and “Other provisions” indexes shown in the table. Provisions marked with an asterisk (*) are included in the UN index. FDI = foreign direct investment; PE = permanent establishment; WHT = withholding tax. 16 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION >> HISTORICAL LEGACIES, CURRENT TRENDS Half (51 percent) of tax treaties in the Tax Treaties Explorer Second, in contrast to the decline in WHT rates, the trend dataset are more than 20 years old (concluded before 2000 across other provisions of tax treaties is toward greater and not updated since), and about 10 percent date from retention of source taxing rights. Figure 1 shows the evolution before 1980. In this time, negotiation practice and the norms in treaties’ provisions for overall source taxing rights, showing set out in the model conventions have changed significantly— that the overall index was increasing in value until 1994, after in ways that strengthen treaties against abuse and, in some which it largely flattened. Underlying this early growth was the instances, expand source taxation rights. The new dataset continued strengthening of source taxing rights in provisions allows us to develop stylized findings about these trends and other than WHT rates, which since 1994 has balanced out clarify existing assumptions. the decline in those rates. Indeed, the index measuring PE definitions shows a quite consistent rise throughout the past The charts that follow display trends over time across all half century. The trends in PE and WHT point to a shift from treaties in the dataset.7 Solid lines represent all treaties in gross to net basis taxation, which may be more challenging force at a given time, considering preindependence treaties, for resource-constrained revenue authorities (Leduc and new treaties, renegotiations, and terminations. They show Michielse 2021). how LMICs’ taxing rights are affected by all their treaties in force and the gradual impact of changes in negotiating norms. Third, Figure 2, which examines WHT rates in the stock of Individual dots show average values for treaties signed each agreements in force, shows that the decline in the past three year. These dots show the outcome of negotiations by LMICs decades is most pronounced regarding dividends. Where they and are more sensitive to trends in negotiating norms and are provided for, rates on technical service fees have also more volatile than the average content of treaties in force, declined, but provision for such taxes has also become much since the latter also includes treaties concluded in the past. A more common in treaties. In contrast, the decline in average treaty that is reflected in the dots will only change the direction interest and royalty rates in the stock of treaties as a whole of the line when it becomes effective. has been relatively small, and these rates are still comparable with rates found during the 1980s. As for new treaties signed, >>> WITHHOLDING TA X E S , the averages during the 1970s and 1980s were similar for P E R M A N E N T E S TA B L I S H M E N T, A N D qualifying dividends, interest, and royalties at 12 percent. T H E O V E R A L L B A L A N C E O F TA X I N G By the 2010s, the qualifying dividends rate had fallen to an RIGHTS average of 7 percent compared with 9 percent for interest and royalties. As an IMF analysis points out, WHT rates in new tax treaties have been “trending down” in past decades, alongside WHT Figure 3 sheds more light on the expansion of PE definitions. and corporate income tax rates in domestic law (IMF 2014, Provisions allowing for source taxation of the delivery of goods 26). The new dataset allows us to clarify the reasons behind are the only ones coded in the dataset to have become less this finding in three ways. common, while the others show a growth in popularity over time. The time threshold for construction and service PE First, the decline in WHT rates in the overall stock of treaties definitions has also declined, as will be discussed later. only begins in the mid-1990s because of the persistence of treaties signed in the 1980s and before with higher rates. Furthermore, the aggregate pattern in newly signed treaties is less of a downward trend and more of a structural change occurring in the early 1990s. This pattern is exaggerated by data artifacts caused by the breakup of the former USSR (Barthel et al. 2010), but it persists once they are excluded, as in the charts that follow. The drivers of this change merit further study. Overall, WHT rates in treaties peaked in 1994, and the treaty network today is on a par the rates that prevailed during the 1980s. 7. Countries of the former USSR have been excluded from this quantitative analysis because of their distorting effect on historical data (Barthel et al. 2010). USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 17 > > > F I G U R E 1 - Changes in Indexes Measuring the Overall Balance of Taxing Rights, 1970-2019 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: The dataset’s “Index of source taxing rights” is a high-level overview of taxing rights, comprising the averages of the PE definition, WHT rate, and “Other provisions” indexes. Solid lines designate all treaties in force at a given time, whereas individual dots designate the average index values for treaties signed in each year. 18 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION > > > F I G U R E 2 - Evolution of Main WHT Rates within Treaties in Force, 1970-2019 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Lines designate averages of all treaties in force at a given time. Legend designates treaty article numbers pertaining to respective withholding tax (WHT) rates. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 19 > > > F I G U R E 3 - Evolution of Various PE Provisions within Treaties in Force, 1970-2019 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Lines designate averages of all treaties in force at a given time. Legend designates treaty article and paragraph numbers pertaining to respective components of the permanent establishment (PE) definition. >>> IMPACT OF M U LT I L A T E R A L treaty of 1994, the Southern African Development Community N E G O T I AT I O N S ON B I L AT E R A L (SADC) model treaty of 2011, and the ATAF model of 2016 T R E AT I E S before its inclusion in the UN model. • Both the OECD and UN model conventions now >>> CHANGES TO THE MODEL CONVENTIONS include paragraph 13(4), which allows for source taxation of gains from the alienation of shares in companies whose value Since its first publication in 1980, the UN model has provided derives predominantly from immovable assets—a protection a template for treaties with expanded source taxing rights, against tax avoidance through offshore indirect transfers of and its evolution in subsequent editions has continued in this assets. Paragraph 13(4) was present in the first UN model direction. In many instances, however, changes to the UN and published in 1980 but was only introduced into the OECD OECD models formalize innovations that had already become model in 2003. prevalent in negotiation practice. Indeed, tax treaty provisions • The two multilateral models only acquired general can diffuse quite widely even when they are absent from the Entitlement to Benefits (antiabuse) clauses in 2017, although UN and OECD models. Examples in the dataset include the some countries have pursued such clauses in their treaties for following: many years. • Article 12A (providing for WHTs on technical service Figure 4 shows the evolution of these three provisions fees) was adopted in the UN model in 2017, but it was within the dataset’s sample of treaties. As before, the becoming increasingly popular before this point, albeit in a proportion of treaties signed in a given year that include each minority of treaties. Aside from bilateral treaties, it could be provision is shown as a dot, while the proportion of treaties found in the Caribbean Community (CARICOM) multilateral in force is shown as a line. Each of the three provisions 20 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION increased in prevalence over the past four decades, even African Tax Administration Forum argues, “Africa is still beset before its adoption in model treaties. In the case of Articles by serious issues such as . . . tax treaties with no appropriate 12A and 29, inclusion in a model convention for the first time tax allocation rights between source and residence taxation appears to lead to a significant increase in the proportion of and thus susceptible to abuse” (ATAF 2019, 15). treaties including it. The inclusion of article 13(4) in the OECD model does not appear to change the overall trend, which is The growing gap between old treaties and present-day unsurprising given that it was already present in the UN model. needs can be understood as a result of several interlinked processes. At the global level, changes to the models are The other trend illustrated in Figure 4 is the substantial based on iterative learning, evolving economic activity, the lag between changes in current negotiating practice and the emergence of new tax planning practices, and some normative body of treaties still in force. The proportion of new treaties shifts. At the country level, they may respond to changing containing article 13(4)— source capital gains on “land rich” patterns of economic relations, modifications to tax systems company—is consistently around 20 percentage points higher (especially the introduction of new taxes), stronger negotiating than those in force. The exponential growth in Entitlement capacity, changing political priorities, and lessons learned to Benefits clauses is even more pronounced. Despite their from the application of treaties. There is ample evidence that inclusion in most of the treaties signed in the past few years, past negotiations by lower-income countries have suffered fewer than 10 percent of those in force included such clauses from capacity deficits, lack of preparation, and pressure from prior to MLI implementation. Keeping unrevised older treaties political actors who did not take into account the full impact of in force thus risks revenue losses both through exposure to treaties on future revenues (Hearson 2021; Irish 1974; Mutava abuse and through the absence of provisions securing source 2019). taxing rights that have now become commonplace. As the > > > F I G U R E 4 - Presence of New Model Treaty Provisions (Excluding Changes due to MLI), 1980-2019 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Solid lines designate all treaties in force at a given time, whereas individual dots designate the average index values for treaties signed in each year. BEPS = base erosion and profit shifting; MLI = OECD/G-20 Multilateral Instrument to Implement Treaty-Related Aspects of BEPS; OECD = Organisation for Economic Co-operation and Development; UN = United Nations; WHT = withholding tax. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 21 > > > T H E M U LT I L A T E R A L I N S T R U M E N T Unless countries’ MLI reservations reflect changes to their treaty policy, its effects are limited. For Articles 13(4) and 5(7), In 2017, members of the OECD/G-20 IF on BEPS tried a the MLI reflects a longstanding preference on the part of lower- new approach to make treaty norms filter through more quickly income countries that is already found in most of their treaties. into treaties already in force. The Multilateral Instrument to Nonetheless, the MLI has added Article 13(4) to around 10 Implement Treaty-Related Aspects of BEPS (“MLI”) offers percent of the treaties in force in the countries featured in the potential to make wide-ranging changes to tax treaties, Figure 6. Conversely, few LMICs have opted into mandatory including in four provisions measured in the dataset. binding arbitration, meaning that it has little impact here. Figure 5 shows the impact of the MLI on all treaties covered The standout difference is the Entitlement to Benefits article, by the dataset regarding four provisions that are captured which treaties amended by the MLI must include in some in the dataset. Figure 6 shows the impact specifically on form. Here, the MLI has amended the body of treaties in force the treaties of five lower-income countries that have already almost overnight, increasing the prevalence of this article to ratified the MLI. For three of these provisions, the MLI largely a level comparable with that in newly signed treaties. Among consolidates changes in the treaty network that have been the five sample countries, the MLI has already increased the under way for decades. This is especially the case because prevalence of this article from 14 percent to 61 percent of the countries choose which of their treaties are to be covered by treaties in force. the MLI and can also opt out of many of its provisions. > > > F I G U R E 5 - Dataset Treaties in Force: Impact of the MLI, 1970-2019 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Solid lines designate all treaties in force at a given time, whereas the four individual dots designate the impact of the MLI on current treaties if all countries’ published positions were to be ratified and come into force. BEPS = base erosion and profit shifting; MLI = OECD/G-20 Multilateral Instrument to Implement Treaty-Related Aspects of BEPS; OECD = Organisation for Economic Co-operation and Development; UN = United Nations; WHT = withholding tax. 22 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION > > > F I G U R E 6 - Impact of the MLI, 1970-2019, on Five Ratifying Lower-Income Countries: Burkina Faso, Arab Republic of Egypt, India, Indonesia, and Pakistan Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Solid lines designate all treaties in force at a given time, whereas the four individual dots designate the impact of the MLI on current treaties if all countries’ published positions were to be ratified and come into force. BEPS = base erosion and profit shifting; MLI = OECD/G-20 Multilateral Instrument to Implement Treaty-Related Aspects of BEPS; OECD = Organisation for Economic Co-operation and Development; UN = United Nations; WHT = withholding tax. >>> I N T E R N AT I O N A L PRACTICE ON The Mongolian government eventually terminated four PE THRESHOLDS treaties, apparently because it did not receive satisfactory responses to its requests to renegotiate. These were with While some suggest that lower-income countries would be Kuwait, Luxembourg, the Netherlands, and the United Arab best served by radically overhauling or abandoning the tax Emirates. treaty system altogether (Dagan 2000; Paolini et al. 2016; Pistone 2010; Shepherd 2013), for many countries the As the IMF report makes clear, however, certain aspects pragmatic response will be to identify the treaties of most of Mongolia’s other treaties should give cause for concern. concern and seek to renegotiate them in line with the best For example, several treaties are “unusual[ly] generous precedent currently available. For example, an IMF technical compared with international standards” because they set assistance report studied Mongolia’s tax treaty network and minimum periods of time for construction and service PEs made recommendations for action. It concluded, regarding in excess of 12 months. Bearing in mind the domestic law’s double tax agreements (DTAs), “In the current situation, only thresholds of 6 months and 3 months, respectively, the IMF a few DTAs can be considered potentially harmful as they report recommends that the construction PE threshold “should insufficiently protect the Mongolian tax base . . . Mongolia not be less than the time period used in [domestic law] (i.e., should take a more differentiated approach toward repairing its 6 months), and try to limit this time period to 12 months (i.e., DTA network by selectively (re-) negotiating and/or amending the internationally acceptable time period)” while the service its current DTAs” (Michielse 2012, 5). PE should always be included in treaties and “should not be extended to more than 6 months (to comply with international USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 23 practice)” (Michielse 2012, 8). Analysis of the new Tax Treaties Explorer dataset confirms these notions of international practice. It is indeed exceptionally rare to find thresholds in excess of 12 months in any treaties in force (Figure 7). For construction PE, the mode is a 6-month threshold, although it is 12 months in around a quarter of treaties. For service PE, it is rare to include a threshold longer than 6 months. That said, only around half of treaties in force have a service PE provision at all. > > > F I G U R E 5 - Construction and Service PE Thresholds within Treaties in Force, 2020 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: The permanent establishment (PE) thresholds shown are the minimum periods of time for construction and service PEs, respectively. “Not included” refers to the number of treaties that contain no such provisions. 24 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION Figure 8 adds an important piece of context to this. While The IMF report notes that although Mongolian law considers the average thresholds for construction and service PE have a person who habitually maintains a stock of goods or stabilized at 8 months and 6 months, respectively, only half of merchandise from which they regularly deliver goods and treaties currently in force include the service PE provision, but merchandise on behalf of a foreign enterprise to constitute a it is becoming much more common. Since the mid-2000s, two- PE, most of its tax treaties do not. It would be worth noting thirds of new treaties in the dataset have included a service here that the stock agent provision is the only source-favoring PE provision. PE provision to have consistently declined in prevalence over the past 50 years (Figure 3). Mongolia’s treaty with China is singled out in the IMF report because both its PE thresholds are unusually long, at 18 months (Michielse 2012). The dataset shows that this threshold is also unusually high for China: it has 45 treaties in force in the dataset, and of these only the treaties with Mongolia, Sudan, and Ukraine have 18-month thresholds. (In Sudan’s case, only the construction PE threshold is 18 months.) These three treaties are all more than 20 years old. > > > F I G U R E 8 - Evolution of Construction and Service PE Provisions, 1970-2019 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: The left axis indicator refers to minimum periods for construction and service permanent establishment (PE) thresholds, respectively. Solid lines designate all treaties in force at a given time, whereas individual dots designate the average index values for treaties signed in each year. The dashed line (measured by the right axis) indicates the proportion of treaties in force that include a service PE provision. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 25 >>> EXPERIENCE WITH The chart shows that all renegotiations that began from a R E N E G O T I AT I O N S treaty whose index value was below 0.4—especially restrictive treaties—led to an expansion of source taxing rights. The Tax Treaty Explorer dataset includes numerous Conversely, when treaties whose index value was above examples of renegotiations, through amending instruments as 0.7 were renegotiated, the result was a weakening of source well as terminations and replacements of treaties altogether. taxing rights. Most renegotiations are, however, clustered In Figure 9, all renegotiations by lower-income countries around the diagonal line, suggesting only a modest change are plotted showing the value of the index of overall source in the overall balance of taxing rights that may be below the taxing rights: the value before renegotiation is on the x-axis sensitivity of the index approach. and following it on the y-axis. The solid line is at 45 degrees, indicating values that are the same on both axes. Treaties above (below) the line have a higher (lower) index value following the renegotiation, indicating that the renegotiation strengthened (weakened) source taxing rights. > > > F I G U R E 9 - Impact on the Overall Source Taxing Rights from Lower-Income Countries’ Treaty Renegotiations since 2010 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: The dataset’s index of overall source taxing rights (on a 0–1 scale) provides a high-level overview of taxing rights, comprising the averages of the permanent establishment (PE) definition, withholding tax (WHT) rate, and “Other provisions” indexes. “Lower-income” countries are those falling within the low- and lower-middle-income categories as defined by the World Bank. Countries are labeled using ISO alpha-3 codes. 26 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION The two most radical renegotiations in a source-based In terms of WHTs, Rwanda’s treaty is a major improvement direction were those by Kenya and Rwanda with Mauritius. from its predecessor, which had prohibited WHTs across Alongside the terminated treaties with Senegal and Zambia, the board. Kenya also obtained taxing rights over ships in these were among the most residence-based of all Mauritius’s international traffic, capital gains, and other income, as well treaties. Table 3 summarizes each, and Annex A provides a as an Entitlement to Benefits article. Given the new treaties’ detailed breakdown of the treaties. The two new treaties are content and Mauritius’s position as a conduit jurisdiction among the most source-based, and it should be noted that responsible for significant revenue loss (Beer and Loeprick Rwanda’s treaty was terminated before these renegotiations, 2021), these terminations and renegotiations reflect a while Kenya’s had been struck down by its High Court. prioritization based on high costs and risks as well as potential Mauritius conceded significantly expanded PE definitions for improvement. Among capital importers from Mauritius, only in both cases, including a halving of the construction and the Republic of Congo has a more residence-based treaty still service PE thresholds. Both countries also obtained WHTs in force (also shown in Annex A).8 on technical service fees, a provision found in only four other treaties concluded by Mauritius. > > > T A B L E 3 - Selected Treaties with Mauritius COUNTRY A DATE OF SIGNATURE STATUS SOURCE WHT RATES PE DEF OTHER 2012 Not in Force 0.37 0.30 0.44 0.38 Kenya 2019 Not in Force 0.78 0.50 0.97 0.88 2001 Terminated 0.19 0.00 0.31 0.25 Rwanda 2013 In Force 0.57 0.48 0.84 0.38 Senegal 2002 Terminated 0.23 0.00 0.45 0.25 Zambia 2011 Terminated 0.22 0.29 0.20 0.17 Congo, Rep. 2010 In Force 0.18 0.09 0.31 0.13 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: PE = permanent establishment; WHT = withholding tax. Two of the renegotiations that impose greater restrictions on apparent priority of expanded taxing rights over gains from taxing rights are India’s, with Norway in 2011 and Romania in the sales of Indian companies under a provision similar to 2013. These appear to reflect a change in India’s negotiating paragraph 13(5) of the UN model, which was already found policy around 2000, toward a less source-based position: in the Norway treaty. Notably, both these renegotiations also WHT rates have fallen dramatically, and several source- introduced an Entitlement to Benefits clause, which has been based provisions—including the UN limited force of attraction found consistently in India’s new treaties for the past decade. provision in Article 7(i) and source taxation of shipping in Article 8—are now rarely found in new treaties signed by India, except a few with LMICs. In contrast, both renegotiations resulted in the removal of taxing rights over indirect transfers of assets through paragraph 13(4) of the model treaties, which is found in the large majority of India’s new treaties since 2000. Instead, the renegotiated treaty with Romania accommodated India’s 8. The Mauritius-Tunisia treaty is more residence-based than Mauritius’s treaties with Senegal and Zambia, but data from the IMF’s annual Coordinated Direct Investment Survey (2000) indicate that Tunisia is a net exporter of capital to Mauritius. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 27 > > > N E W N E G O T I AT I N G PA RT N E R S The second panel illustrates treaties with several gulf states, which now have wide treaty networks with lower- Figure 10 shows new treaties signed by lower-income income countries, reflecting the interests of sovereign wealth countries with some of the most prolific negotiators in recent funds, airlines, and the oil industry. Notably, many of these years. The top panel shows India and China’s treaties, countries do not tax income and so the risk of double taxation illustrating that, since 2010, the mid 2000s, the two have may be especially low. The finding here is that treaties’ content diverged considerably, India now concluding more source- is much more varied overall, with some treaties scoring low in based treaties, and China more residence-based treaties. the index. All these treaties have relatively low or zero WHT Decomposing this further shows that the overall WHT rates, but their PE definitions are much more heterogeneous. settlements for the two countries are similar, whereas India’s recent treaties have much more expansive PE definitions than do China’s. > > > F I G U R E 1 0 - Index of Source Taxing Rights for New Treaties Signed by Lower-Income Countries and Selected Countries a. India and China, 1960-2020 b. Selected Persian Gulf States, 1990-2020 Source: Tax Treaties Explorer, https://tinyurl.com/yjlvvakg (panel a) and https://tinyurl.com/yjdj6z9x (panel b). Note: The scatterplot represents data from the index of overall source taxing rights, which covers all coded clauses that relate to the balance of taxing rights, comprising the averages of the permanent establishment (PE) definition, withholding tax (WHT) rate, and “Other provisions” indexes. It gives a high-level overview of the treaty. Each dot designates an individual treaty between one of the specified countries with a lower- income country that was signed in a given year. “Lower-income” countries are those falling within the low- and lower-middle-income categories as defined by the World Bank. 28 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION >> R E P L I C AT I O N S T U DY: TA X T R E AT I E S A N D F D I As noted earlier, much academic literature is animated by the >>> R E P L I C AT I N G T H E F D I IMPACT question of how tax treaties affect business decisions. From a M O D E L W I T H N E W D ATA policy perspective, a key question is whether a new treaty can be expected to increase the stock of investment between the In the first stage of the analysis, the impact of a treaty on FDI treaty partners. The answer, we suggested, depends on the is captured as a dummy variable indicating that a tax treaty terms of the treaty and the identity of the treaty partners, as is effective. During the period of 1978 to 2003, our sample well as on the two countries’ existing treaty networks and the includes 1,814 dyads and 547 tax treaties. characteristics of their tax systems. Our approach makes three small changes from the baseline Here we examine the first part of the puzzle: how do the of Barthel, Busse, and Neumayer (2009). First, in common terms of a treaty shape its impact on FDI? Given the increasing with that study, we take the year of effectiveness as the start of sophistication of the literature on this topic, our aim in what the treaty’s effect on FDI. In contrast to it, however, where the follows is simply to demonstrate how the Tax Treaties Explorer treaty becomes effective retrospectively—that is, the effective dataset can help build on existing findings by replicating a date is earlier than the signed date—we use the date of previous study and replacing the binary independent variable signature. Our rationale here is that any investors influenced measuring the presence of a treaty with variables based on the by the presence of a treaty may be unwilling to commit dataset. Our proof-of-concept study suggests that only lower capital until it has been signed. Second, we account for treaty treaty WHT rates are positively associated with FDI stocks. terminations, setting the value of the dummy to zero in years This finding should be tested using more recent innovations in after a treaty ceases to be effective. Finally, where there is data and methodology. a disagreement between the Barthel, Busse, and Neumayer (2009) dataset and the Tax Treaties Explorer dataset, we use Our starting point is a 10-year-old study that finds that tax the latter. treaties positively affect investment flows (Barthel, Busse, and Neumayer 2009). We chose this study because its We report the results of three models in Table 4. The full sample overlaps well with treaties in the dataset, its model methodology and data sources are outlined by Barthel, is straightforward to replicate, and the authors have made Busse, and Neumayer (2009), but, in summary, the first two the data to do so available online. Briefly, the original study models are a standard panel regression using dyadic fixed- is a dyadic panel data model, using dyadic fixed effects, that effects, where each dyad of countries has its own intercept examines the impact of tax treaties on bilateral FDI stocks. and for which we use standard errors clustered on dyads. The authors conclude that a tax treaty between two countries The dynamic model differs from the static in that we include increases the stock of FDI by approximately 30 percent and the lagged value of the dependent variable, which reduces that treaties’ effect on the stock of FDI increases with age. any overestimation of results due to the dynamic effect of FDI This is a large effect size and may be prone to overestimation (Egger and Merlo 2007). We also replicate a third model from because it does not account for treaty shopping. Barthel, Busse, and Neumayer (2009), based on the Arellano and Bond (1991) generalized method of moments (GMM) Our analysis proceeds in two steps. First, we recreate estimator, which is used to correct any presence of Nickell the model from the study of Barthel, Busse, and Neumayer (1981) bias that may arise in the dynamic estimator and also (2009), using their replication data but inserting revised data to take into account any possible endogeneity. The number on effective treaties, drawn from the Tax Treaties Explorer of lagged instruments is restricted to six. Following Barthel, dataset. Second, with respect to those dyads in which a treaty Busse, and Neumayer (2009), the results in column (3) use is in force, we examine how the treaty’s content increases or the age of a treaty instead of the dummy. reduces its impact on FDI to determine which provisions that favor source state taxation can be included in a treaty without affecting FDI stocks. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 29 > > > T A B L E 4 - Estimation Results for Pure Replication (1) (2) (3) FE STATIC FE DYNAMIC ARELLANO-BOND GMM 0.386*** 0.096** DTT (dummy) (t) (0.088) (0.038) 0.027*** DTT Age (t) (0.009) 0.496*** 0.107*** BIT (t) (0.089) (0.029) -0.000 BIT Age (t) (0.009) 0.760*** 0.715*** (ln) FDI Stock (t-1) (0.030) (0.052) 0.274*** 0.089*** 0.064*** (ln) GDP (t) (0.038) (0.015) (0.021) 0.018 -0.024 0.058 (ln) GDP p.c. (t) (0.089) (0.029) (0.051) -0.018*** -0.007*** -0.002 (ln) Inflation (t) (0.005) (0.002) (0.002) 0.002*** 0.001*** 0.001** Trade Openness (t) (0.000) (0.000) (0.000) 0.473*** 0.098*** 0.083 Regional Trade Agreement (t) (0.134) (0.037) (0.054) Observations 20,762 18,019 15,859 R-Squared 0.182 0.643 Number of Dyads 1,814 1,671 1,560 AR2 (p-value) 0.516 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Robust standard errors in parentheses. BIT = bilateral investment treaties; DTT = double taxation treaty; FDI = foreign direct investment; FE = fixed effects; GMM = generalized method of moments; p.c. = per capita. The results are consistent with those presented in Barthel et replication, but the main independent variable is now the index al. (2010), with the coefficients for the presence of a tax treaty of overall source taxing rights. Columns 7–9 show the partial in all three models positively and significantly associated with effects of the three subindexes that make up the overall index: higher FDI stocks. The coefficients translate into effect sizes withholding tax rates (“WHT rates”), permanent establishment as follows: having a tax treaty in effect increases the stock definition (“PE def”), and other clauses affecting the balance of FDI in a dyad by 47 percent in the static model, or around between source and residence taxation (“Other”). Columns 20 percent over the long term in the dynamic model. In the 10–12 show the results using the index of similarity to the UN original paper, these figures were both around 30 percent.9 model treaty as the independent variable. > > > A P P LY I N G D A T A S E T I N D E X E S T O In columns 4 and 5, the index of overall source taxing rights DYA D S W I T H T R E AT I E S I N F O R C E is negatively and significantly associated with the stock of FDI in both the static and dynamic models, suggesting that greater Our next step is to replace the binary tax treaty variable with protection for source taxing rights reduces the stock of FDI. the indexes discussed earlier in the paper. These apply only to Concretely, switching one treaty clause from the least to most dyads for which a tax treaty was effective. It should be noted source-based text included in the dataset reduces the stock that value of the indexes for a given dyad may vary as treaties of FDI by around 2 percent. In columns 7–9, it is WHT rates are amended or renegotiated. In Table 5, columns 4–6 show that most convincingly affect FDI stocks once we attempt to the results for the same three types of model as in the pure compensate for overestimation, Nickel bias and endogeneity, 9. For the exact interpretation of the coefficients, we considered the necessary correction for the estimated variance for coefficients of dummy variables in semilogarithmic equations, as in Kennedy (1981). 30 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION as they are negatively and significantly associated with FDI stocks in both the dynamic and GMM models. Concretely, in the dynamic fixed effects model, an across-the-board reduc- tion in all types of WHT rate of 1 percentage point would in- crease the stock of FDI by 2 percent in the short term and by 3.5 percent over the longer term. The effect size is 4 percent in the GMM model. The limitations of this replication study illustrate the potential for future research using the dataset. To begin with, we replicated a study whose methodology has been superseded in most more-recent publications by the use of microdata or network analysis to account for the impact of treaty shopping. Furthermore, we were only able to use absolute WHT rates in treaties and not the differential between domestic law and the treaty rate; similarly, for other provisions, we could not compare treaties with the domestic law position at the relevant point in time. Our replication study also omits elements of the treaty that are not coded but that studies have shown to have a greater impact on investment, notably “tax sparing” clauses. Finally, we focused only on FDI: it would be interesting to consider how portfolio investment as well as trade in goods, services, and intellectual property might be affected by relevant treaty provisions. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 31 > > > T A B L E 5 - Estimation Results for Model with Indexes (6) (9) (12) (4) (5) (7) (8) (10) (11) ARELLANO- ARELLANO- ARELLANO- FE FE FE FE FE FE BOND BOND BOND STATIC DYNAMIC STATIC DYNAMIC STATIC DYNAMIC GMM GMM GMM -1.321** -0.821*** -0.791 Source (t) (0.647) (0.226) (0.508) -0.266 -0.517*** -1.836** WHT Rates (t) (0.367) (0.170) (0.830) 0.430 0.015 1.797 PE (t) (0.355) (0.125) (1.169) -1.658*** -0.450 -1.105 Other (t) (0.401) (0.306) (1.326) -1.321* -0.453 0.358 UN (t) (0.737) (0.322) (0.679) 0.589*** 0.346*** 0.588*** 0.342*** 0.593*** 0.369*** (ln) FDI Stock (t-1) (0.055) (0.072) (0.055) (0.056) (0.056) (0.072) 0.496*** 0.248*** 0.014 0.511*** 0.253*** 0.015 0.511*** 0.245*** 0.009 (ln) GDP (t) (0.132) (0.089) (0.018) (0.131) (0.089) (0.017) (0.137) (0.092) (0.018) 0.766** 0.162 0.281*** 0.716** 0.149 0.264*** 0.735** 0.171 0.296*** (ln) GDP p.c. (t) (0.347) (0.172) (0.106) (0.345) (0.170) (0.095) (0.359) (0.180) (0.113) -0.019 -0.013 0.181 -0.020 -0.014 0.289 -0.017 -0.014 0.075 (ln) Inflation (t) (0.018) (0.012) (0.290) (0.018) (0.012) (0.272) (0.018) (0.012) (0.292) 0.005* 0.003** -0.005 0.005* 0.003** -0.008 0.005** 0.003** -0.005 Trade Openness (t) (0.003) (0.002) (0.010) (0.003) (0.002) (0.009) (0.003) (0.002) (0.011) Regional Trade 0.174 0.011 0.004* 0.176 0.015 0.003 0.172 0.010 0.005* Agmt (t) (0.191) (0.095) (0.003) (0.190) (0.095) (0.002) (0.190) (0.095) (0.003) 0.129 0.061 -0.014 0.126 0.058 0.046 0.130 0.064 -0.009 BIT (t) (0.103) (0.063) (0.072) (0.103) (0.064) (0.076) (0.107) (0.066) (0.072) Observations 3,263 2,792 2,335 3,262 2,792 2,335 3,202 2,741 2,289 R-Squared 0.279 0.548 0.822 0.281 0.548 0.760 0.274 0.550 0.899 Number of Dyads 438 380 349 438 380 349 431 375 345 AR2 (p-value) 0.822 0.760 0.899 Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. Note: Robust standard errors in parentheses. BIT = bilateral investment treaty; FDI = foreign direct investment; FE = fixed effects; GMM = generalized method of moments; p.c. = per capita; UN = United Nations model treaty; WHT = withholding tax. *** p<0.01, ** p<0.05, * p<0.1 32 >>> USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION >> CONCLUSION The new Tax Treaties Explorer dataset is a powerful tool In these and other areas, recent practice should embolden for research by negotiators and policy makers as well as by countries to seek stronger safeguarding of source taxation researchers. In this paper, we have illustrated some of the rights in their negotiating positions, as well as provide a new insights that can be drawn from these data, in the hope compelling rationale to renegotiate older agreements that are that future research will deepen this analysis. There can be no longer consistent with current practice. Although declining no substitute for a detailed legal study of the wording of tax WHT rates since the 1990s may give countries cause to doubt treaties and their interaction with countries’ tax systems. the benefits from renegotiations, this is counteracted by the Nonetheless, in the aggregate, stylized findings of the kind we broadening of PE definitions. have identified here can inform and empower negotiators from lower-income countries. The replication exercise we have conducted here is only a proof of concept, and its results should certainly be tested using The necessity of analyzing the recent treaties signed by a more sophisticated models and a wider range of data, as we potential negotiating partner is widely recognized in guidance discussed above. Still, its tentative conclusion suggests that from international organizations. The dataset can assist WHT rates are the main drivers of any relationship between with this task, but it also points to clearer notions of current tax treaties and FDI stocks. If this result is confirmed, it would international practice at a more general level. Certain clauses suggest that negotiators can seek the maximum protection of that were rarely included in older treaties are now found in source taxing rights in other parts of the treaty, knowing that most lower-income countries’ newly signed agreements as this is unlikely to dilute any investment-promoting impact of well as in model conventions, such as the following: the treaty. Conversely, a capital-importing country that does not wish to concede substantial reductions in WHT rates may • Inclusion of supervisory activities related to have little reason to negotiate a treaty, since without those construction activities, as well as the services PE clause, in concessions the impact of the treaty on investment could be Article 5 of the UN model small. • Source taxation of capital gains from sales of shares in “land rich” companies, found in Article 13 of the OECD and As international guidance urges lower-income countries to UN models since 2003 prepare more carefully and critically for negotiations, future • Addition of the Entitlement to Benefits article to both research using the dataset may offer important guidance. models in 2017. USING NEW DATA TO SUPPORT TAX TREATY NEGOTIATION <<< 33 >> APPENDIX A > > > T A B L E A 1 - Selected Tax Treaties with Mauritius, 2001-19: A Detailed Breakdown REPUBLIC OF KENYA KENYA RWANDA RWANDA SENEGAL ZAMBIA ARTICLE, THE CONGO (SIGNED 2012, (SIGNED 2019, (SIGNED 2001, (SIGNED 2013, (SIGNED 2002, (SIGNED 2011, PARAGRAPH NO. NOT IN FORCE) NOT IN FORCE) TERMINATED) IN FORCE) TERMINATED) TERMINATED) (SIGNED 2010, IN FORCE) 5(3)(a)C, months 12 6 12 6 9 9 12 5(3)(a)S YES YES YES YES YES YES YES 5(3)(b), months 6 3 12 6 9 NO 12 5(4)(a) YES NO YES NO YES YES YES 5(4)(b) YES NO YES NO YES YES YES 5(5)(b) NO YES NO YES NO NO NO 5(6) YES YES NO YES YES NO NO 5(7) NO YES NO NO NO NO NO 7(1)(b&c) YES YES NO YES NO NO NO 7(3) YES YES YES YES YES NO YES 8(2) NO YES NO NO NO NO NO 10(2)(a)Q,% 5 8 0 10 0 5 0 10(2)(a)T,% 10 - - - - 25 25 10(2)(b),% 10 8 0 10 0 15 5 11(2),% 10 10 0 10 0 10 5 11(2)F,% 10 10 0 10 0 10 5 12(2), % 10 12 0 10 0 5 0 12(2)C, % 10 12 0 10 0 0 0 12(2)E,% 0 12 0 0 0 0 0 12A,% 0 10 0 12 0 0 0 13(4) NO YES NO NO NO - NO 13(5) NO YES NO NO NO NO NO 14 NO NO YES NO YES YES NO 16(2) YES YES NO NO NO NO NO 21(3) NO YES NO YES NO NO NO 25B(5) NO NO NO NO NO NO YES 27 YES YES NO YES NO NO YES 29 NONE PPT NONE NONE NONE NONE NONE Source: Tax Treaties Explorer dataset, https://www.treaties.tax/. 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