Designing an Inclusive and Equitable Framework for Tax Treaty Dispute Resolution: An Indian Perspective

Tax treaty dispute resolution is neither efficient nor equitable at the moment. This is particularly problematic in light of countries' adopting aggressive tax policies to tackle base erosion and profit shifting practices, resulting in an increase in disputes. The MAP has had limited success, while discussions on new mechanisms to supplement the MAP (such as tax treaty arbitration) have proved controversial and have failed to bring developed and developing countries to a consensus. India has been one of the countries in vocal opposition to tax treaty arbitration, even as it staggers under the sheer volume of international tax disputes. Against this backdrop, this article proposes a workable means of tax treaty dispute resolution, with specific focus on the concerns expressed by India. The authors first analyse available domestic and international mechanisms in India for resolving disputes, including the MAP under tax treaties. The authors then evaluate the pros and cons of non-binding or binding solutions to supplement the MAP under tax treaties. Next, they examine concerns raised by developing countries, with specific reference to Indian constitutional and legal concerns as regards a binding dispute resolution regime. In light of this analysis, the authors propose a possible institutional framework for tax treaty dispute resolution tailored for India that takes into account these concerns and attempts to be both inclusive and equitable.