Private and Public dispute Resolution in International Taxation

The principal purpose of this essay is to focus some attention on this largely neglected area by describing how private and public international tax disputes arise and how they are commonly resolved and then analyzing the consequences of the current international tax dispute resolution techniques International tax disputes arise in two general contexts The first is probably the most common dispute and involves a taxpayer or taxpayers on one side and the government of governments on the other side. In resists the imposition of taxes The second type of dispute involves two or more government arguing over the allocation of tax revenues derived from trade and investment transactions between their territories In the second type of dispute, private taxpayers may have little or no role In both types of disputes, the amounts involved usually are very substantial and reach hundreds of millions and even billions of US dollars Korea, the Us, Japan, China and many other countries have procedures for the issuance of advanced pricing agreements ("APAs") in APAs in transfer pricing cases involving both customs duties and income taxes and many of the agreements involve not just the Korean National Tax Service, but also the tax authorities of foreign countries The Korean National Tax Service and China's State Administration of Taxation (SAT) concluded the first bilateral APA between China and Korea on 7 November 2007 The APA involved a Korean multinational group and its two Chinese subsidiaries As the subsidiaries filed separate applications with their respective tax bureaus, the bilateral agreement may be more accurately referred to as the "twin APAs" form China's perspective The growing use of APAs and arbitration proceedings to resolve international tax disputes between taxpayers and governments is generally accepted as a step in the right direction The use of last best offer or base ball arbitration rules to resolve transfer pricing controversies seems especially note worthy because it encourages both sides to adopt more reasonable positions in controversies often fraught with great uncertainties There has been some criticism, however, about the secrecy provided in the arbitration rules Given the US's sad history of a dual tax system because of the past secrecy of private letter rulings, it seems wise to make the arbitration proceedings more transparent