Numerous authors (including Mosquera Valderrama, Bronsens and Bossuyt, and Ozai to name but a few) have criticised the legitimacy of the international tax agenda and its proposals. The world, especially the developing world, has seemingly been dragged along to conform, coordinate, and cooperate. Not all of these effects are necessarily good for such countries. Developing countries are struggling to not only keep up with the rapidly evolving international tax regime changes, but are also trying to make headway in becoming equal participants in the processes and secure developments and regime changes that are in their favour as the traditional ‘source’ countries. Moreover, developing countries have significant capacity and resource constraints that prevent participation on an equal basis. One of the fundamental criticisms of the current regime is its focus on residual taxing rights of residence countries. The UN has made headway in proposing tax treaty articles that favour source countries more, but these do not always go far enough. Equally, the creaking architecture of the international tax system is straining under the weight of rapid evolution of business models. Are developing countries beginning to show signs of push back against these erosive forces?

In a recent article (Emerging Treaty Policies in Africa – Evidence from the African Tax Administration Forum Models) published by the IBFDs Bulletin for International Tax, I explore the African Tax Administration Forum (ATAF) Models as published in 2016 and 2019. The study of these regional models is performed with a two-fold purpose: (i) to test the often stated hypothesis that regional models have no value as they are mere hybrid versions of the OECD and UN Models; and (ii) irrespective of the outcome of the first hypothesis to test whether the reservations to the ATAF Models reveal anything of tax treaty policy of African countries that participated in these models.

Perhaps unsurprisingly, the ATAF tax treaty models borrow significantly from the OECD and partly the UN Models. Only in a few limited instances, do these models expand the source taxing rights (most notably for the concept of permanent establishment as related to services and natural resources – both key concerns in African countries). This is usually where the enquiry into regional tax treaty models stops. The treaty text reveals that the model is mainly a hybrid of OECD and UN Models and is therefore (usually) ignored. However, in my view, this is a mistake as the value of the regional tax treaty model does not lie in the treaty text, but in the reservations to that text by the participating countries. In the case of both the 2016 and 2019 ATAF models, 22 African States participated in its development and 21 of those States lodged reservations against the 2019 ATAF model. While this is only around 58% of the ATAF membership and only 40% of the countries in Africa, it represents a good starting point to develop an understanding of the tax treaty policy positions of a number of African States. While ATAF represents 38 of the 55 African States, only 4 record non-member country positions against the OECD model and no positions or reservations are recorded against the UN Model. Thus, the position of African countries is unclear from those two mainstream models.

So, what can be learnt from a study of the ATAF Model reservations? Firstly, African countries that participated in the process are becoming more aware of tax treaty issues and signalling their own national position. The number of reservations against the ATAF Model has increased from 78 to 105. The reservations remain framed by the current international tax regime - but push back in treaty negotiation can already be observed. It is here where the value of regional tax treaty models really lies.

Based on my analysis, the ATAF Model serves the African tax community by providing an avenue for those countries not contributing non-member country positions to reflect their tax treaty policy. Secondly, a study of the reservations reveals that some countries appear to be adopting different positions regionally as opposed to globally. Thirdly, the treaty model provides a sound basis for treaty negotiation or renegotiation in Africa (which struggles under old colonial or generally outdated tax treaties sacrificing their tax base). However, inconsistences can also be observed between the reservations against the regional model versus the country’s reservations against the Multilateral Instrument.

I believe that the regional models have a stronger role to play in the future. Not only giving countries that would otherwise not feature on the international stage a voice, but also acting as a possible precursor to regional tax co-ordination. Hopefully, this and future iterations of the ATAF Model will yield a better deal for African countries and the continent in the near future.