How do the OECD's model tax conventions affect international taxation?

The Organization for Economic Cooperation and Development (OECD) is an international body dedicated to promoting economic development and growth. As part of this mandate, the OECD creates and maintains a set of international agreements known as model tax conventions. These conventions provide a framework for the taxation of cross-border activities, such as investments and the flow of goods and services between countries. The OECD’s model tax conventions serve a number of important functions. First, they reduce the cost and complexity of international taxation by minimizing the number of tax disputes that can arise between two nations. Second, they decrease the likelihood of double taxation, which occurs when two nations attempt to tax the same income or assets. Finally, model tax conventions also provide a basis for international tax planning and help to ensure that a multinational company will be able to take advantage of tax benefits offered in different countries. The OECD’s model tax conventions also help to reduce tax avoidance and prevent multinational companies from shifting profits between countries in order to avoid taxation. This is achieved in two ways. First, the conventions set forth the principles of allocation of income and provide guidance on how income and other taxable events should be treated and taxed between different countries. Second, they establish procedures enabling countries to exchange information on taxpayers and their activities to ensure that income is accurately reported and taxed. The OECD’s model tax conventions are an important mechanism for harmonizing international taxation and provide a basis for international tax cooperation. By helping to reduce double taxation and tax avoidance, these conventions contribute to the fairness, efficiency, and competitiveness of international taxation across countries.

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How do the OECD's model tax conventions affect international taxation?

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