Along with the globalization, the world is becoming one community which shares economy, culture, and necessary information, and the globalization speed is to be further accelerated in the future.
The US subprime mortgage crisis which has driven the whole world into the difficult situation clearly shows that the world economy is closely integrated and thus the global community must create a further workable global system for its harmonious co-prosperity considering such a changed circumstance.
In fact, it would be difficult to think of the development of global economy without the development of global legal system in the future since the global economy is to be directly affected by the global legal system. In this respect, it can be said that the role of global organizations which make the global legal system is becoming more and more important.
In the current global community which is being closely integrated economically, unlike the past, enterprises do not need the military support from their own government for the market penetration into other states any longer. Thus, the current excessive military power could incur an unnecessary expense which can be used for other beneficial purposes and cause an unnecessary conflict.
If the global community introduces a common management system of the world military power, the world military power will be able to perform a kind of police function which is necessary to the development of the global community, and in that case there would be a necessity of discussing a systematic (or legal) approach to the common management system of military power. Likewise, it is thought that the global community can introduce such a similar systematic approach to the international politics.
However, since such topics are remote as yet in terms of timing, this thesis focuses on a systematic (or legal) approach to the development of the global community just from the standpoint of global economy.
Chapter II reviews the development process of global organizations, and Chapter III mentions the economic efficiency of rule which can be judged in terms of ¢®¡Æsocial benefit¢®¡¾, ¢®¡Æsocial expense¢®¡¾ and ¢®¡Æcorruption effect¢®¡¾ relating to the rule, the role of the government which should creates a circumstance under which each enterprise could maximize its profit through economic activities, and the role of international organizations which affect the transnational activities significantly.
Chapter IV reviews the establishment purport of international organizations and studies the legislation approach from the standpoint of economic development and from the regulatory perspective.
From the standpoint of economic development, unless there is a commerce barrier, multi-national enterprises can freely do business anywhere it advances resulting in the increase of the global wealth. They don¢®¯t need strong auspice from their own government for their business activities in the other countries any longer since the international organizations are helping these enterprises freely do business all over the world through their legislation activities.
Thus, there is a necessity that, for the development of the global community, the international organizations should make an effort greater than ever to promote the free cross-border business activities by multi-national enterprises and, in doing so, pay attention to issues such as the extension of FTA & tax treaty and the equity of taxing rights between nations.
From the legal perspective, there wouldn¢®¯t be a substantial difference between the global community and each state in terms of study of a mechanism regulating the undesirable business activities. Under such premise, this topic is discussed based on the Korean cases.
As each business field has a specific character, if the global community wants to introduce a rule of regulating the problems of a specific business field, it should ascertain the problem of such specific business field and seek out a solution to it. It means that if the global community wants to cure problems in every business field, the global community needs a case by case approach to each field.
However, this thesis does not discuss a case by case approach to each field but focuses on a general principle for reasonable regulation. It emphasizes that in order to effectively cure problems taking place in the global community, the global community should establish a common regulatory mechanism (principle) of increasing the social benefits, decreasing the social expense and eliminating the corruption effect. That principle should be based on the policy effect, non-policy effect and corruption effect of a regulation.
Chapter V studies a mechanism of harmonizing legal conflicts between tax treaties and domestic tax laws, and then discusses how to handle the legal conflicts between other treaties and domestic laws.
Since a tax treaty normally consists of approximately 30 articles, it is actually difficult to resolve all issues related to international transactions by only 30 articles. Accordingly, there has been being discussed a necessity of applying domestic tax laws where a tax treaty itself cannot resolve the related issues.
The position supporting the application of domestic tax law is based on the fact that the purpose of a tax treaty lies in the prevention of double taxation and tax evasion and OECD Model Commentaries allow the application of domestic anti-avoidance rule. On the other hand, the position objecting to the application of domestic tax law is based on the Vienna Convention which provides ¢®¡ÆEvery treaty in force is binding upon the parties to it and must be performed by them in good faith.¢®¡¾ and ¢®¡ÆA party may not invoke the provisions of its internal law as justification for its failure to perform a treaty.¢®¡¾
The problems related to the execution of a tax treaty can be classified into three kinds of pattern as follows: 1) a problem related to the interpretation of terms used in the article of a tax treaty, 2) a problem related to the interpretation of tax treaty provisions, and 3) a problem related to applying a domestic tax law (such as anti-avoidance rule) to what is not provided otherwise in the tax treaty.
First, where a tax issue occurs in relation to the interpretation of terms, it can be resolved by applying the standard provided in Paragraph 2, Article 3 of the OECD Model Tax Convention and the related tax treaty without a treaty override issue.
Second, a problem related to the interpretation of tax treaty provisions can also be resolved without a treaty override issue. Commentary 3 on Introduction of the 2005 OECD Model Tax Convention emphasizes that ¢®¡ÆMember countries, when concluding or revising bilateral conventions, should conform to this Model Convention as interpreted by the Commentaries thereon and having regard to the reservation contained therein and their tax authorities should follow these Commentaries, as modified from time to time and subject to their observations thereon, when applying and interpreting the provisions of their bilateral tax conventions that are based on the Model Convention.¢®¡¾
Third, a problem related to applying a new domestic tax law (such as anti-avoidance rule) to what is not provided otherwise in the tax treaty should be approached in a more careful way. Commentary 9.2 on Article 1 of the OECD Model Tax Convention states ¢®¡ÆTo the extent these anti-abuse rules are part of the basic domestic rules set by domestic tax laws for determining which facts give rise to a tax liability, they are not addressed in tax treaties and are therefore not affected by them. Thus, a general rule, there will be no conflict between such rules and the provisions of tax conventions.¢®¡¾
In order to eradicate an unnecessary dispute relating to this matter, it is necessary to establish a clear and reasonable principle to ascertain a true treaty override action as follows: Only where the legislation which comes under a treaty override action unilaterally infringes upon the taxing rights of other contracting state and significantly hampers the legal stability, must it be treated as a treaty override legislation which violates the Vienna Convention. On the other hand, where a newly established domestic tax law is applied in accordance with the purpose of a tax treaty, it must not be treated as a treaty override action.
As there are a number of international laws other than a tax treaty, it is necessary to resolve the related treaty override problems using a practical ¢®¡Æfield by field approach¢®¡¾ rather than a simple theoretical approach. However, if there is still a necessity of taking a theoretical approach, it is necessary to classify international laws field by field and apply both the ¢®¡Ælater-in-time principle¢®¡¾ and the ¢®¡Æspecial law priority principle¢®¡¾ harmoniously in order to secure the harmonious execution of an international law and a domestic law.
If some states adhere to the later-in-time principle to do treaty override legislation and other states respect the treaty priority principle, the global community will continue to face with tax disputes. Therefore, it is necessary to minimize tax disputes by establishing a clear and reasonable principle for the development of the global community.
- global legal system,
- economic efficiency of rule,
- equity of taxing rights,
- common regulatory mechanism,
- harmonizing of legal conflicts,
- treaty override
Available at: http://works.bepress.com/sung_soo_han/9/