Institut für Österreichisches und Internationales Steuerrecht www.wu.ac.at/taxlaw 1

Alternative dispute resolution methods – tax mediation with the existing instruments

Prof. Dr Pasquale PistoneVienna, 13 October 2015

Email: pasquale.pistone@wu.ac.at

Institut für Österreichisches und Internationales Steuerrecht www.wu.ac.at/taxlaw 2

Key issues

Expected increase of international tax disputes Effective protection of taxpayers’ rights Prevention and non-judicial settlement of

disputes through enhanced use of existing tools Arbitration as final point for disputes that cannot

be settled otherwise Mediation can enhance functioning of arbitration

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Expected increase of disputes

The BEPS project steers international tax law towards a coordinated exercise of taxing jurisdictions

It introduces structural elements that may require coordinated interpretation, in order to prevent and settle cross-border tax disputes, but may also reduce legal certainty

Þ Expected increase of international tax disputes Two judgments by two separate national tax Courts are not

necessarily solving problems Unrealistic to think that all such disputes can be arbitrated

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Effective protection of taxpayers

Traditional view: disputes concerning the interpretation and application of tax treaties between two States affect taxpayers, but do not require their involvement

An alternative view: taxpayers are holders of rights and not just objects of tax agreements

If global problems require global answers by tax authorities, the protection of rights cannot remain confined at the level of an uncoordinated exercise of national remedies

Þ Plea for timely and effective global tax remedies

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Preventing disputes with existing instruments

Think ahead and prevent some problems => dialogue with taxpayers

Use existing legal instruments and adapt them to current scenario of international tax coordination

Cooperative compliance, advance rulings and advance pricing agreements, tax mediation

A new dimension for MAPs with a more direct involvement of taxpayers => more transparency in use of discretionary powers

Wording of Art. 25 OECD MC allows for involvement of a mediator and participation of the taxpayer to MAPs

EU VAT CBR pilot programme (rulings)

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Mediation and arbitration

Mediation should be incorporated in a process that only leads to arbitration when disputes cannot be solved => arbitration as possible final point of a bilateral mediation process

Some dilemmas: Unilateral vs bilateral mediation A global scheme for mediating international tax cases: an

issue for the multilateral instrument to consider? Should mediators be independent? Should ombudsman and national courts be at all involved? Does the effective participation of taxpayers harm the speed

of the procedure? If so, how can we still timely preserve taxpayers’ rights?

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How can mediation enhance arbitration?

By reducing the number of cases that should go all the way to arbitration

By providing technical arguments concerning facts and difference in the position or parties

When it cannot mediate the different positions, it can at least potentially aggregate motivations and help in building two blocks, which can streamline the work of arbitrators, reduce cost and even lead to baseball arbitration

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Conclusive remarks

Global require global solutions, not just as to how States effectively collect taxes in cross-border situations, but also as to how rights of taxpayers are effectively protected

In the absence of an international tax court, arbitration offers an interesting mechanism for solving cross-border disputes

Arbitrating all international tax disputes is unrealistic after BEPS Arbitration may be expensive and should be used when parties

unanimously require it, or when a solution cannot be found otherwise in reasonable time through mediation

Developing an international tax mediation process incorporated in a path that may (but must not) end in arbitration

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Thank you

pasquale.pistone@wu.ac.at