ORGANISATION FOR EUROPEAN RESTRICVED ECONOMIC CO-OPERATION Paris, 3rd May, 1960 FC/WP14 (60)2 Seale 6 or, Engl. WORKING PARTY No. 14 OF THE FISCAL CONMETTER (Austria - Sweden) NOTE CONCERNING ARTICLES E, P/and 6 ~ OF THE GENERAL PROVISIONS OF THE CONVENTION (Received on 2nd May, 1960) The. Vorking Party has received written comments to Draft Articles. E (Mutual:Agreement Procedure), F (Exchange of, Information) and @ (Diplomatic and Consular Privileges) Imeluded in document TFD/WP14(59)1, made by the Delegations of Belgium;-Irelend, the Netherlands and Switzerland.’ The Working Party has thought fit to have circulated those comments without drawing any-conclusions of their own, as sue éonclusions should not be drawn'untdl a full discussien has taken" place within the Committee. The Working Party feels that the comments mede form a-good basis for that discussion, ARTICLE E Paragraph 1 The Swiss Delegation suggests that the provisions should ply not only in cases of double taxation but alsw in each se, where the taxation in one of the Contracting States is ntrary to the principles of the Convention and that the tax- yer should be entitled to claim for the mutual agreement cedure, if he 4s only taxed by one of the Contracting States, jen this State has.no taxation right under the Convention. ragreph 2 of the Article shouldbe amended accordingly.” As, in the opinion of the Swiss Delegation the mutual reement precedure does not have anytiing to do with the iternal legal reuedies, this shonld be empliasized in & new ragraph 5, which shonid read as follows:FO/WPL4(60)2 - ae ‘Phe objection referred to in paragraphs 1 and 2 may be “: de even if the taxpayer has not exhausted all the Legal medies open to him; conversely, the taxpayer chali not be copped from resorting to all the remedies open to him under e internal law by reason of the fact that he has an objection aforesaid." The Delegations of the Netherlends ard of Ivéland would fer the term "provisions" instead of "principles"; they nk that “principles", if it means the underlying principles the Convention, would be extended too far by according a gut of complaint” of the non-observance of principles which not laid down expressly in the text of the Convention. Should be only a matter of the Contracting States and not the taxpayers to clear up disagreements on the principles ‘the Convention. The Delegation of the Netherlands thinks that a sident of one Contracting State should only be entitled ask for the mutual agreement, where he shows proof that measures of the other Contracting State resuit in a ation, contrary to the provisions of the Convention. Delegation suggests that, paragraphs (1) and.(2) of the t Article should be replaced by the following: "Where.a resident of one.of the Contracting States lodges ‘laim with the competent authority of that State on account Actions of the.tax authorities in the other. State which @ alt op will result for him in taxation which is contrary the provisions of this Convention the competent» authority the furst-mentioned State shall, in case the claimis med to be justified, communicate with the authority of other Contracting State in order to settle this matter, S procedure is without prejudice to the internal legal jedies. EE . The Belgian Delegation suggests that it should be ‘ovided for that the claim should be made within a fixed period, Parazraph 3 The Swiss Delegation would like to make it: possible under ‘thet provision for the Contracting States to reach specific agreements as provided in paragraphs 2 and 4, On the other hand, the Belgion Delegation means that the Le procaduve could restrot the legislation powers of the tracting States in a way which is not admitted under the ernal laws of that State.-3- Te/wPi4(60)2. In the opinion of the Netherlands Delegation one should examine if also non-residents could come under paragraph 3. Poragraph 4 The "Joint Commission", foreseen in paragraph 4 is leomed by. the Swiss Delegation, which thinks that for the me being a Consulting Commissicn would be the best means jv the interpretation of double taxation Conventions; it ems appropriate to that Delegation that the Fiscal Committee, eh is achieving an important work of unification of the les against double taxation, could act as such a Consulting mmission, The advice of such a Consulting Commission should nd the States in question only if they. agreed to that. effect. In ‘the opinion of the. Irish Delegation paragraph’ 4 would without. any effect as an agreement within 2 Joint Commission wid hardly be found if former consultations have not brought’ ch agresment, ARTICLE F ‘The Swiss Delegation declines the whole provision and wants: it-deleted, as-in their mind a Convention for. the avoidance: of: double taxation should only deal with the elimination of.double taxation but not also with the prevention of fiscal evasion, An exchange ef information could cnly be foreseen as far as it is necessary for the application of the special provisions of the Convention, fer example when the mutual agreement procedure is introduced er vhere relief from taxes levied at the source is claimed. ‘The-Netherlands:Delegatien thinks that the powersef — < the tax authorities to-obtain information fromthe taxpayer. will: probably: verys from State to-State and. hopes: that there could be found a more objective criterion es regards the extent to-which=the States are obliged to supply information. The Delegation-further suggests that there shouldvbe: added the..words' "or ef the other Contracting State" at. the end ef litt. a) in paragraph 2 and that in litt. b) of the same paragraph the words "to supply-particulars, which cannot 'be demanded" shouldbe included: instead vf “which are not obtainable", -Pinally, the Netherlands Delegatign .prepeses to exclude in paragraph 3 alse information obtained’ frem banks or-similar institutions as, fer example, Insurance companies.Pe/UPLs(6o)2 -4e 8 ‘The Belgian Delegation thinks that it would be useful that ‘information Should be supplied automatically without. a foregoing demand of the other State. Furthermore, in the Commentary to the Article mention should be made of the possibility of concluding bilateral Conventions for, administrative assistance as the Article itself ddes not provide for inquiries to be introduced when asked for by the requesting State, %cMfhe rdsh Delegation would like to have:mentioned in the Article “also the “prevention of fraud" and to! say "legal avoidance" instead of "fiscal evasion", as the latter term has’ainore ‘comprehensive meaning. The last two sentences 4nvparagraph 1 should be replaced by the following phrase: ws “Any: information so exchanged shall be: treated as secretand shall not te disclosed to any persons other than those. concerned with the assessment and collection cf the taxes which are the subject of the present Conventions" Furthermore, the Irish Delegation proposes to eliminate paragraph 2 as litt. b) may cover laws other than taxation laws and-seens to imply that administrative measures taken under paragraph 2 (amended according to the Irish suggestion) could be at: variance of the law. Paragraph 3 Should be deleted and replaced by the wording: "No information; as aforesaid, shall be exchanged. which would disclose any trade,‘ business, industrial or professional secret or trade process”, ARTICLE. G In the opinion of the Irish Delegation the privileges of diplon.tic and consular officials, flowing: frem. inter- national law cannot be affected by a double taxation Cenvention}. ‘therefere, the whole Article should’be deleted, oo) Tp seems useful to the Netherlands Delegatien: to eunsider notienly such officials who Pepresent.one of the Contracting States, but alse these who represent=third States. In, this-connection the matter should be clarified: ofswhicn State'the officials are deemed te be residents far the purposes ef the Convention. An additional provision’ 1s held necessary if the Convention provides fer reimbursement ef taxes.levied'at the source on income frem-movablé property. A definitien ef the categories of officials coming under Apticle G is suggested. ¥ oO @ee + Fo/WPLA{60)2 “5 The Belgian Delegation proposes to replace the term “official” by “diplomatic agent", An additionel provision pould be ineluded in order to prevent unjustified tax xemptiens. The Swiss Delegation means that such clause as stated in Artiole G is wholly unnecessary for officials of multilateral (intergovernmental) organisations as those persons are dealt with in special agreements between such organisations and the States where they have their headquarters.