Is Article 5 of the OECD's Model Tax Convention still fit for purpose Coursework

Is Article 5 of the OECD's Model Tax Convention still fit for purpose given the changes in world trade since the Article was fir - Coursework Example Raising personal income taxes or the goods and services tax any further would be extremely unpopular with the people. There is widespread anger in the UK and in other OECD countries about the tax avoidance practices of large multinational corporations. In the UK, the Public Accounts Committee of Parliament questioned senior executives of Starbucks, Amazon and Google on their tax avoidance practices which were held to be against the spirit if not the letter of the law 2. Multinational Corporations (MNC) accounted for over $33 trillion in global sales in 2010 with a value addition of over $16 trillion, representing one-quarter of the world GDP. Many of the MNC from the Fortune 100 list have bigger revenues than several of the emerging economy countries around the world and most of these MNC are headquartered in the OECD countries 3. 1 Browne, J. and Roantree, B., â€Å"A Survey of the UK Tax System†, IFS Briefing Note BN09, October 2012. accessed 20 March 2013. 2 Knight, L., â⠂¬Å"Corporate tax avoidance: How do companies do it?† BBC News, 4 Dec 2012. accessed on 20 March 2013. 3 UNCTAD Report, â€Å"World Investment Report 2011†, United Nations Conference on Trade and Development accessed on 20 March 2013. ... ve definition, a sovereign state is made up of three core elements â€Å"people, territory and a government† and the government of a territory has the sovereign right to tax people living in that territory 4. A Multinational Corporation, by definition, operates in multiple countries and there is the perennial challenge of determining which government has taxation rights over the MNC and for what part of its income. 2. The Evolution of the OECD Model Tax Convention The Organization for European Economic Cooperation which later became the OECD first published a draft double taxation avoidance agreement in 1958 with the objective of preventing individuals or companies being taxed in both the country of residence (Country R) and the country of source for the income (Country S) and for the prevention of tax evasion. This document has served as the basis for over 3000 bilateral tax treaties in force around the world 5. The Model Convention has been periodically updated by the OECD a nd a draft 2012 revision is currently in circulation. Many developing countries around the world felt that the OECD model convention was unduly favourable to the advanced economies and lobbied the United Nations to evolve an alternative Model Double Taxation convention which was first issued in 1977. 4 Ring, D.M., â€Å"Democracy, Sovereignty and Tax Competition: The Role of Tax Sovereignty in shaping Tax Cooperation†, Boston College Law School, 28 Jan 2009. accessed on 20 March 2013. 5 Bennett, M., â€Å"The 50th Anniversary of the OECD Model Tax Convention†, 2008. accessed on 20 March 2013. This model has also been periodically updated. The UN model gives the source country greater rights to tax income than the