tax notes international - Tuck School of Business - Dartmouth College

dependent agent on behalf of the nonresident enterprise,
together with sufficient capital to support those
assets and risks. Therefore, the authorized OECD approach
is the only one that leads to an outcome that is
coherent with the fiction of independence provided in
article 7(2).
Furthermore, there is no reason why the attribution
of profits to an agency PE should be treated differently
than the attribution of profits to other types of PEs.
The adoption of the single taxpayer approach results in
applying the OECD approach in different manners depending
on what type of PE is involved, which is
clearly unreasonable.
Also, the adoption of the single taxpayer approach
would make article 5(5) of the OECD model superfluous,
which is against one of the main principles that
guides the legal interpretation process — that the law
does not have useless words.
Finally, considerations of a practical nature should
not overcome a legal interpretation that is harmonious
with the wording of the legal text, and is the reason
why the authorized OECD approach should prevail
over the single taxpayer approach, even if the former
may be a more difficult application in practice.
SPECIAL REPORTS
The analysis of the relevant case law shows that attribution
of profits to PEs is still a controversial issue,
although a trend towards the adoption of the authorized
OECD approach can be seen.
Moreover, the criticisms of the application of the
authorized OECD approach to treaties currently in
force are somehow weakened as the OECD Committee
on Fiscal Affairs adopted, at its meeting of June 24-25,
2008, the revised commentary on the current article 7
of the OECD model and included it in the 2008 update
to the model.
Tax practice shows that there will always be room
to discuss the legal status of the OECD commentary
as well as the historical debate between the static and
ambulatory interpretation of the commentary.
Therefore, the states that concluded OECDpatterned
treaties should put all their efforts into implementing
the necessary changes to adopt the authorized
OECD approach because only a uniform interpretation
of article 7 of the OECD model among the states can
ensure that no double taxation will arise, greatly benefiting
cross-border trade. ◆
TAX NOTES INTERNATIONAL FEBRUARY 2, 2009 • 445
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