Tax Treaties

This category is firstly based on data from table 4 and figure 3 in chapter 4.5.1 on ‘Bilateral tax treaties between European and developing countries’, showing the total number of tax treaties with developing countries, as well as the average rate of reduction of developing country withholding tax rates in those tax treaties, for all the countries covered by this report.

Secondly, this rating takes into account whether a country has any ‘very restrictive’ treaties with developing countries, based on data from table 5 in chapter 4.5.1 on ‘Bilateral tax treaties between European and developing countries’.

As noted in the report, some countries have integrated anti-abuse clauses in their bilateral tax treaties. Although this is positive, these clauses do not address the main concern about tax treaties – namely that they are used to lower tax rates in developing countries and reallocate taxing rights from poorer to richer countries. Therefore, the presence of anti-abuse clauses is not used as a determining factor in the rating system outlined below.

For the European Parliament and Commission, this category is based on information from chapter 4.5.2 on ‘How to avoid harmful effects of tax treaties?’ and chapter 5.6 on ‘Measuring the impact of European tax policies’.

Green
Countries that do not have any ‘very restrictive’ tax treaties with developing countries, and for whom the average reduction of withholding tax rates in treaties with developing countries is below one percentage point. For the EU institutions, this category includes institutions that have proposed concrete measures that would mitigate and prevent negative impacts on developing countries due to treaties signed with EU member states.
Yellow
Countries that do not have any ‘very restrictive’ tax treaties with developing countries, but for whom the average reduction of withholding tax rates in treaties with developing countries is above one percentage point. Although the tax treaties of the countries in this category are not harmless, the negative impacts of the country’s tax treaty system are relatively limited, either because the country has relatively few treaties (below the average – 41.77 tax treaties – for countries covered by this report) or because the average reduction of developing country tax rates in those treaties is relatively low (below the average – 3.39 percentage points – for countries covered by this report). For the EU institutions, this category includes institutions that have acknowledged the problems tax treaties can cause for developing countries, but have not yet put forward concrete proposals for mitigating and preventing these problems.
Red
The tax treaty system of the country is relatively harmful, either because the country has signed some ‘very restrictive’ treaties with developing countries, or because the average reduction of withholding tax rates in treaties with developing countries, as well as the total number of tax treaties the country has with developing countries, are both above the average among the countries covered in this report (3.39 percentage points and 41.77 treaties respectively). For EU institutions, this category includes those who have not yet acknowledged the problems tax treaties can cause for developing countries.
Arrows: Show that a country seems to be in the process of moving from one category to another. The colour of the arrow denotes the category being moved towards.
  Restricted access sign: Shows that the position of the government is not available to the public, and thus the country has been given a yellow light due to a lack of information.