To define the set of rules and situations governed by the rules of international taxation is necessary to make a brief digression on what are the subjects of international law. In particular, we will briefly illustrate the relationship between EU Tax Law, International Tax Law and the regulations of the national tax, especially the Italian one.
In international law-system there is no the phenomenon of taxation because the community of does not detects and recognizes a higher Institution to which is attributed the power to tax the original.
In the absence of a hierarchy of rigid regulatory landscape this paper will attempt to illustrate the world tax system.
In order to identify the scope of the rules of international taxation system, it is useful to start to talk about this discipline according to the criteria of the source-type, so distinguishing between:
- The International Tax Law
- Treaty law – and therefore conventional field Formal Tax Law
- Internal Law – national and then International Tax Law ;
- EU law – within the EU and therefore EU Tax Law
- Supranational law with a focus on atypical sources, so-called soft law.
The International Tax Law
At this point we can enunciate the art. 38 of the Charter of the International Court of Justice that list the sources of international law that can be applicable to the international tax law:
1. The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply:
- international conventions, whether general or particular, establishing rules expressly recognized by the contesting states;
- international custom, as evidence of a general practice accepted as law;
- the general principles of law recognized by civilized nations;
- subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law.
2. This provision shall not prejudice the power of the Court to decide a case ex aequo et bono, if the parties agree thereto.
Aside from the scope of the treaty law, which will be discussed later, it can be noted that among the sources of international law are counted international customs. The Common international law is an unwritten source consists of a uniform behavior held by the states on the basis of the binding of that behavior.
In Italy, Article 10 of the Italian Constitution provides for the international practice “a process of automatic adjustment or special” according to which” The Italian legal system conforms to the generally recognized rules of international law.” It is a formal referral, according to which the rule invoked continues to belong to its original order and it is not entered into the calling, but it is applicable in the latter the prescriptive content.
Included, in addition, in the sources of law “the general principles of law” recognized by civilized nations. The principles to be binding must be established and uniformly applied in most states, as well as being recognized as binding so that they pose as a particular expression of the customs.
You can find some generally recognized principles and international practice that are often the foundation of positive norms of conventional tax law and which are recognized by self-limitations of the systems of international tax law .
These principles can be remembered that:
A) tax based on the actual source of income, through to which will be taught a basic criterion for the resolution of conflicts between different national prescriptive claims ;
B) worldwide taxation principle, according to which the individual states can tax residents on income produced anywhere whether or not a personal connection is sufficient to justify the tax claim;
C) Non-discrimination principle in tax treatment.
The Conventional Law (Treaty Law)
The distortions to international investment can be avoided or limited internationally through agreements between the States which assume the form of specific bilateral Treaties. These Treaties are concluded in written form by persons who have the ability to international law, containing the rules designed to resolve or reduce the conflicts of the tax claims of two sovereign states with the power to tax the original that assume the role of the Contracting States.
The Contracting States shall prepare a set of rules which, in relation to different cases of income that may give rise to competition of taxing powers; powers that grant exclusive or non-exclusive to one or another state or by the criteria of tax residence or the income-source. The Convention creates a sort of division of state sovereignty and jurisdiction of the municipality even though atypical in relation to different cases of income. The sovereignty of a State shall not be exercised only within its own territory, but also within the international community of States, in the exercise of legal capacity under international law. The tax treaty law is part of international tax law, being made by the principles and rules found in tax treaties concluded between States and effectively summarized in the OECD Model.
The set of rules of treaty law tax consists of:
- Conventional formal rules , the criteria for the connection real or personal ;
- substantive provisions of the agreement to eliminate double taxation determined by the competition of the alleged prescriptive -state ( Ex: exemption for foreign income , net of tax and the tax credit) ;
- substantial conventional norms of various kinds ( non-discrimination, mutual agreement
- procedure, exchange of information) ;
- Conventional norms in matters of interpretation and mutual agreement procedure designed to ensure the resolution of disputes.
In Italy, in order to transpose into national law the international tax Treaties there is a procedure of ratification contained in the art. 80 of the Constitution. This means that this source of international law is applied in the Italian system as a source of international law, thanks to a piece of legislation, ratification, which includes the content.
The Internal Law
The international tax law is a branch of the right to regulate all substantial tax cases that affect simultaneously several legal state, as well as instruments and instrumental methods for defining and sharing amongst Member States the exercise of the right of taxing in relation to the cases above indicated. There is a real independent “international tax code” from the international law and to States regulations, as there is no today a higher-level State authority with the power to enact tax laws “binding.” In regards to the Europe, just think that the European Union has not yet made a real EU taxing right to replace the taxing right of the Member States. The international tax law is inserted in the context of the public international law, defined as the set of legal rules governing the international legal relations between the Member States of the international community. The public international law (and thus also the international tax law) is distinguished from other legal equality of the legal position of members (sovereign states) and especially the absence of a central and overarching.
Under the law in question there are two types of rules: 1 – the legal rules for the production of international law; and 2 – the general principles of international law. The first are the sources of law in the technical sense, which set out how they form the sources of international law.
Historically we have established two categories of legal rules for the production of international law: customary (or daily practice) and the international agreements or conventions. The tax issues that have arisen as a result of the globalization process (and the effects thereof) and the increasing intervention of international organizations such as the EU, OECD, ECOFIN, GATT, have meant that international tax law from developing by taking sections of the public right and sections of the tax law. In other words, international tax law governing a sphere of relationships that go well beyond those of a public nature interstate, just think that the rules of international tax law directly affects the individual citizen or entity. Ultimately you can place international tax law halfway between public international law and the law of the States. The sources of law in this area should to be found in all those legal acts considered as such by the Member (as there is no supranational authority sovereign neither a written constitution) if we refer to rules bout “law production”.
However the more recent doctrine agrees that in the light of the innovative shape, in international tax law, you can encompass all acts or facts that despite belonging to different legal systems have as their object the regulation of international tax relations. Below is the result of an extended concept of a source of law that allows you to highlight seven categories of sources of international tax law:
- general principles of international tax law;
- rules of customary international tax;
- International tax agreements;
- OECD model double taxation International;
- constitutional requirements of the various States in tax matters;
- sources of adaptation of domestic laws to the national tax rules;
- Administrative and Common procedures in the field of international tax law.
The Italian law designates a macro set of legal rules whose components are all linked to a common foundation of validity expressive of a fundamental norm, typically a formal construction material. The Italian tax law refers to a set of legal rules that form part of the designated. In particular, the tax law or order of a state is understood as the set of rules that state relating to taxes. The sources of tax law Italian are the laws and other legal acts and equivalent regulations.
The international tax law is therefore the area of the Italian tax law consists of rules of internal source, but relate to items with extraneous elements that generate transnational income. The set of rules of the international tax law is composed of:
- internal rules that determine the criteria of personal connection (residence) and actual (source) of the case ;
- internal rules governing the tax treatment of such cases ;
- internal rules for the avoidance of double taxation;
- Internal rules of various kinds.
In addition to this it is necessary to consider the formal sources of tax law that relates to cross-border income, or rulings and administrative actions (i.e. questioning) that have a value binding for the addressee only.
The EU Law
The EU tax law is a simple partition of EU law that is within the sphere of public international law. But it is not wrong to say that EU law derives in part from the right of the states that make up the European Union. The first difference between the international tax law and EUl tax law is therefore in the absence of a supranational body in the first case and in the presence of an independent legal personality (the European Union) in the second, imposing constraints and bounds through Directives and Regulations (to be transposed into the legal systems of the Member States) .
Another difference is clear from the purposes that the two disciplines are intended, in fact the main purpose of EU tax law is the harmonization of the tax jurisdictions in the Member States to come to establish a single EU system of taxation. International tax law purpose is to avoid double taxation and tax distortions in international investments. The sources of the EU tax law also are neither agreements nor the customs, rather stem from the normative acts of the organs of the European Union. It is clear that the production tax regulations affecting the European national tax rules. In the literature, it also speaks of membership of EU tax law in the sphere of international tax law since both are designed to produce their effects in the Member States. It is clear that the aims of the EU tax law do not coincide with those of the international tax law.
The sources of the EU tax law are the same as the EU law and can be divided into three categories or levels that determine its rank. We have then: a) the original sources EU constitutional (or the Treaty establishing a Constitution for Europe); b) the sources EU derivative or ordinary rank (regulations and directives); c) the sources of the EU law derived from secondary rank (Board decisions, the Court of Justice, opinions and recommendations of EU, plurilateral agreements). It is interesting to note in this connection that the organs of the European Union who may be involved in the EU taxation (the Council, the Commission and the Court of Justice) are not vested with powers of taxation, which remains in the hands of the individual states. It should also be noted that, while the general principles of international tax law are a source “independent” of law , the general principles of EU tax law does not have the status of a source. Here we only report the existence of two categories of principles of the EU law, the first relates to the general organizational principles while the second general substantial principles. Ultimately it can be said that the tax law is part of EU at large of international tax law. We distinguish between “primary EU law” and “derived EU law”, meaning with the first one constituted by the rules of the Treaty of Establishment and the second one consists of the Directives and Regulations. The EU tax law, which belongs to the tax Italian system, is the set of provisions contained in international tax law inside Italy as a result of the adaptation process of the internal primary and secondary EU law. The link between EU rules related to tax and international treaties can be defined indirectly. In fact, both are in need of a legislative measure to the states for internal legal effects within the same. In this view, therefore, there can be no direct competition between a standard source community and an international convention.
The tax soft law
Sometimes because of the complex interaction of national, international, covenantal and communal dimensions often lead to the emergence of structurally supranational fiscal systems. The term “soft law” is indicating acts which do not constitute formal sources of international law, sources of law or internal taxation but which acquire at various levels and in various legal effects (i.e. OECD Commentary, interpretation and the various guidelines approved by committees or institutions).
In conclusion we can count among the sources of law affecting international taxation:
- the sources of international tax law (conventions, customs, general principles recognized by civilized nations) ;
- The sources of international tax law, tax rules or internal to the states.