Specifically, the League of Nations group decided that international tax issues should be addressed not by a multilateral global agreement, but at bilateral level. As a result, since the 1920s countries had signed thousands of bilateral «double-tax treaties» that followed the general League of Nations guidelines of source-based taxation and arm’s length pricing, but differed in a myriad of specific ways. While international trade was governed by a multilateral agreement since 1947, namely, the General Agreement on Tariffs and Trade (GATT), to date no such a multilateral treaty exists for corporate taxes48.
In 1954, the focus of action in the field of international taxation shifted from the League of Nations to the Organization for European Economic Co-operation and further on to the OECD. On 30 July 1963, the Council of the OECD adopted the Recommendation concerning avoidance of double taxation and published a new Model Convention and Commentaries in 1977.
According to the OECD, «International juridical double taxation can be generally defined as the imposition of comparable taxes in two (or more) States on the same taxpayer in respect of the same subject matter and for identical periods. Its harmful effects on the exchange of goods and services and movements of capital, technology and persons are so well known that it is scarcely necessary to stress the importance of removing the obstacles that double taxation presents to the development of economic relations between countries». Correspondingly, «the main purpose of the OECD Model Tax Convention on Income and on Capital is to provide «a means of settling on a uniform basis the most common problems that arise in the field of international juridical double taxation»49. Since 1963, the OECD Model Convention has extended its influence far beyond the OECD area serving as a pattern for tax treaties between member and non-member countries and even between non-member countries.
In the mid-1960s, the United Nations renewed its interest in the problem of double taxation as part of its action to promote flows of foreign investment to developing countries. The UN stated that «The growth of investment flows from developed to developing countries depends to a large extent on what has been referred to as the international investment climate. The prevention or elimination of international double taxation – i.e. the imposition of similar taxes in two or more States on the same taxpayer in respect of the same base – whose effects are harmful to the exchange of goods and services and to the movement of capital and persons, constitutes a significant component of such a climate»