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Combatting Tax Treaty Abuse: Tools available under the BEPS Multilateral Instrument

South Centre, Geneva has published my article titled ‘Combatting Tax Treaty Abuse: Tools available under the BEPS Multilateral Instrument’ as Tax Cooperation Policy Brief, which may be viewed at the below mentioned link:



The article draws attention to the effective combination of Preamble and the PPT in combating treaty abuse inter alia on the following lines:

1. The article highlights that in the post MLI scenario, the entire focus of extending treaty benefits has now shifted to undertaking bonafide transactions and preventing double taxation as against securing tax savings through tax avoidance.

2. The incidence of invoking PPT provisions may increase as it is to be read with the preamble where the preamble now clearly lays emphasis on combating treaty-shopping arrangements, abusive tax planning and abusive tax avoidance arrangements or transactions.

3. This follows on taking a leaf out of (i) Preamble to the MLI, (ii) Vienna Convention, (iii) OECD Commentary on PPT and (iv) ATO’s instructions on PPT which abundantly highlight on conjoint application of the preamble in the course of invocation of PPT provisions. The findings of these four important literatures on PPT as read with the preamble have not been discussed together before as has been done in this article.


At the same time, tax authorities in any part of the world may not be inclined to invoke PPT as read with the preamble in respect of any arrangement or transaction when taxpayers are able to discharge their onus establishing that (below mentioned conditions to be satisfied in tandem):

- genuine business and commercial reasons for a transaction exist;

- a purpose for the transaction cannot be ascribed to non-taxation or reduced taxation through tax evasion or tax avoidance;

- despite no tax advantages, the transaction would be carried out exactly in the same way; and

- it cannot reasonably be considered that one of the principal purposes of the arrangement or transaction is to obtain treaty benefits and that the object and purpose of the treaty is getting defeated.


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