Introduction

The foundation of the tax treaty system is the extensive network of tax treaties that has evolved since the work of the League of Nations in the 1920s. The OECD assumed a lead role in guiding the tax treaty system following the disbandment of the League of Nations and its replacement by the UN. The OECD's main vehicle for guiding the tax treaty system norms is the OECD Model and Commentary, together with reports on specific topics. The tax treaties of OECD countries are based on the OECD Model which is the centrepiece of the tax treaty system. As countries vigorously protect their sovereignty and jurisdiction to tax, the implementation of the OECD Model and Commentary in the tax treaties of both OECD and non-OECD countries is a considerable achievement.

This chapter considers the importance of the OECD Model and Commentary in the tax treaty system. OECD countries are expected to base their treaties on the OECD Model, thus the OECD Model and Commentary provides the context in which tax treaties are negotiated by OECD countries. The chapter argues that OECD countries are required to use the Commentary as an extrinsic aid in interpreting their tax treaties and it is also used by non-OECD countries in the interpretation of tax treaties. In Chapter 6 the meaning of former Article 7 of the OECD Model is examined in light of the pre-2008 Commentary and the 2008 Commentary. Chapter 7 studies the issue of deductions for interest on intra-bank loans under former Article 7 by reference to the pre-2008 Commentary.