The tax treatment of interest and dividends under tax treaties from the perspective of law and economics.

There is an assumption in academic literature and legal practice that tax treaties are effective, i.e. that they succeed in removing tax obstacles and therefore lead to an increase in economic activity between both contracting states. However, there has been remarkably little fundamental research in order to assess whether that assumption is correct. An analysis on the basis of law and economics may offer valuable insights in this respect. The proposed research project will seek to assess the effectiveness of tax treaties in the context of interest and dividend payments. In particular, three core issues will be addressed: (1) the classification of items of income as interest or dividends, (2) the determination of the source of interest and dividend income and the resulting division of taxing powers between source state and residence state, and (3) the different measures aiming to prevent the abuse of tax treaties.

Keywords:tax treatment, dividends, economics, interest, tax treaties, law

Disciplines:Applied economics, Economic history, Macroeconomics and monetary economics, Microeconomics, Tourism