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Abstract

This paper considers the intersection of income tax and WTO rules. It defends an interpretation of the non-discrimination obligations in line with customary rules of interpretation as stipulated by the Vienna Convention on the Law of Treaties. It, thus, departs from the historic assumption that income taxes are not or only to a very limited extent covered by the GATT. Subsequently, the reach of the GATS in terms of its non-discrimination obligations and the substantive defenses thereto is assessed. It is analyzed how states may justify their discriminatory income tax measures under the subparagraphs of Article XIV of the GATS. Additionally, the stringency with which measures are assessed under the chapeau of Article XIV is illustrated. The last section of the first part reviews the applicability of the SCM Agreement with respect to income tax measures. It further analyses the scope of the SCM Agreement with respect to transfer price adjustments. Lastly, an interpretation of arm’s length in footnote 59 of the SCM Agreement in accordance with the OECD Transfer Pricing Guidelines is defended. Having established the far-reaching scope of the WTO covered Agreements with respect to income tax measures, the second part analyses the rivalry between the respective dispute settlement mechanisms of tax and trade. It dismisses a narrow understanding of jurisdictional overlap that appears to exclusively focus on conflicting judicial decisions and proposes and approach under which the judicial settlement of disputes may rival with the institutionalized diplomatic dispute resolution procedure under tax agreements. Provisions and legal principles that may allow Panels to find income tax disputes inadmissible under the GATT, GATS and SCM Agreement are assessed. The third part reviews, albeit briefly, the appropriateness of the WTO DSB venturing in the field of international income taxation. Considerations are introduced that go beyond the black letter of the law and may ultimately influence the decision to favor an inclusionary or exclusionary approach to income tax measures.

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