In all its history as an independent country, Guyana has only entered into three Double Taxation Agreements. Two of these are bilateral – with Canada in 1987 and with the UK in 1992 – while the CARICOM Agreement signed in 1995 is a multilateral Agreement, involving several countries. In a case brought against Guyana by Rudisa, the Surinamese company, the Caribbean Court of Justice ruled that a Double Taxation Agreement has the force of international law and must be observed by the parties.
Despite its name, a double taxation agreement is guided as much by mutual investment and trading as by tax considerations. Where there is no such mutual investment and trading, a double taxation agreement can work against the host country, and any decision to enter into a treaty should not be taken lightly, as evident in the case of Suriname, a CARICOM member, which has not signed the treaty . Maybe in one of his conversations with the Surinamese President, President Irfan Ali will raise this question.
When countries are in an unequal investing relationship, it is preferable that the less developed country should enter into an investment treaty guaranteeing the security of the investment while maintaining its basic tax laws of the host country. Maybe that explains why President Irfaan Ali did not respond favourably to the call by a recent Saudi Delegation to Guyana for a Treaty between our two countries, even as he unhesitatingly agreed to a Saudi desk in the Ministry of Finance.
It is worthy of note that even an Investment Treaty does not automatically translate as evident in the case of such a treaty signed with Kuwait in 2010 which has so far produced little by way of actual investments.
The United Nations Model Tax Convention generally favours retention of greater so-called “source country” taxing rights under a tax treaty the taxation rights of the host country of investment—as compared to those of the “residence country” of the investor. This has long been regarded as an issue of special significance to developing countries, although it is a position that some developed countries also seek in their bilateral treaties.
Broadly, the general objectives of bilateral tax treaties include the protection of taxpayers against double taxation with a view to improving the flow of international trade and investment and the transfer of technology. They also aim to prevent certain types of discrimination as between foreign investors and local taxpayers, and to provide a reasonable element of legal and fiscal certainty as a framework within which cross-border operations can take place. Against this background, tax treaties should contribute to the furtherance of the development aims of developing countries.
Finally, it has become clear as a result of international focus on base erosion and profit shifting that treaties must as far as possible, prevent treaty shopping and other treaty abuses.
There are various models of double taxation agreements, with the OECD model having been the most popular for decades. Recently however, there has been a major shift towards the towards the United Nations (UN) model which offers a more equitable arrangement, reducing the imbalance which overwhelmingly favoured the interests of the investing country over the host country.
A recent study on such agreements signed by Zimbabwe concluded that poorly negotiated double taxation agreements has “serious repercussions on the tax revenue collection and ultimately on service delivery for poverty reduction and addressing inequality.”
It is unclear and unfortunate that there was no public discussion, or the views of the accounting profession sought, prior to the signing of the Agreement signed with the UAE.
