Current Trends in Balancing Residence and Source Taxation

The international tax system has always reflected a tension between residence and source taxation from its very beginnings in the 1920s when the first model treaties were devised. After several decades of relative quietude on this front we are currently witnessing a new struggle over international taxation. The most obvious sign of this change is the G20/OECD project on Base Erosion and Profit Shifting (BEPS) which is seeking to involve developing countries both through the adoption of the project by the G20 involving large developing countries such as Brazil, China, India and Indonesia, and by engagement with other developing countries as part of that process. This paper briefly describes what is meant by residence and source taxation, the traditional justifications for each and how both are under threat in practice, then discusses whether both residence and source taxation are necessary, next turns to what is some countries' changing policy position on residence and source taxation, and finally discusses what may be the results of the current emergence of the new economic powers – the BRICS – on the international tax system