The language used in tax treaties is a challenge with regard to international taxation, according to N D Raghavan, vice-president, income tax appellate tribunal, Hyderabad.
Raghavan was speaking at a seminar on TDS (tax deduction at source), EPC (engineering, procurement and construction) contracts and outbound investments organised by the International Fiscal Associations (IFA) Hyderabad sub-chapter.
Headquartered in Netherlands, the IFA is a non-governmental organisation dealing with tax matters.
The language of tax treaties leaves considerable scope for interpretation due to which various issues like conflict of source, qualification and interpretation of domestic law come up for adjudication. This calls for greater cooperation between countries, so that conflicts are resolved in the best interests of trade promotion, he added.
Raghavan also said that the treaty relationship with domestic law often created complications.
In view of continuous fiscal restructuring that the domestic law undergoes, it becomes difficult to renegotiate the treaty provisions every time the domestic law is changed, he added.