Austria’s tax treaties: reducing developing countries’ revenues?

   0   0 Aid, Tax & State-building, Blog, Tax Treaties

We’ve written a fair bit about tax treaties in the past few days, and have also updated and slightly expanded our tax treaties page. Now, in the spirit of the week, we offer a guest blog from Martina Neuwirth of the Vienna Institute for International Dialogue and Cooperation (VIDC,) highlighting a study of Austrian tax treaties by Julia Braun and Daniel Fuentes, published in April.

Guest blog: Austria’s tax treaties and developing countries

Austria has a wide network of nearly 90 double tax treaties (DTTs), of which around 40 are with developing countries.

Austria’s treaty network in Asia is quite narrow; there are only five treaties with countries in Latin America, and just one with a sub-Saharan country, South Africa. Austria’s focus is on the Central and Eastern European (CEE) region: over 1000 multinational enterprises coordinate their activities from Austria and 300 have established regional headquarters here. The country also seems to be a location of choice for Special Purpose Entities. Though only about a dozen exist, they made up about a third of Austria’s outbound and inbound FDI stocks in 2011.

The study concludes that Austria benefits from its DTTs disproportionally allocating taxation rights to “residence” countries (where multinational corporations are typically resident: in most cases we are talking about Austrian multinationals.) This potentially induces a loss in revenue for developing countries. Austrian treaties also limit developing countries’ access to satisfactory exchange of information.

The econometric analysis suggests that DTTs increase the number of Austrian FDI projects in developing countries. But it is not clear whether DTTs trigger more FDI or whether it is merely the case that Austria signs DTTs with countries where Austrian firms are already active. Austria’s policy to negotiate treaties mostly with countries with which it has close economic ties points to the latter. What is more, about a third of Austrian FDI projects in developing countries originate from third countries’ investors who use Austrian subsidiaries. And the results could capture some treaty shopping.

The authors’ general conclusion is that it would be advisable for developing countries to conduct tax treaty impact analyses in order to be able to estimate their potential effects.

Find the study and a summary here. 

Related Posts

UN must defend target to curtail multinational companies’ tax abuse

Photo by Luca Santori, Creative Commons LicenseThe Tax Justice Network, The Independent Commission for the Reform of International Corporate Taxation, and the Global Alliance for Tax Justice call on the UN Secretary General to make sure the commitment to action on tax abuses by multinational companies remains part of the new UN Sustainable Development Goals.


The BVI: Responsible for worldwide tax losses of $37.5 billion a year

BVI report blogAn extraordinary report by consultants Capital Economics, for BVI Finance, claims that the British Virgin Islands are responsible for $1.5 trillion of assets invested around the world, and that these result in 2.2 million jobs and $15 billion in tax revenue. A better approximation would be that the BVI imposes global tax losses of $37.5 […]


Event: Making Tax Work for Women in the UK and Globally

Invitation_ Tax and Gender eventOn Wednesday 28th June 2017 at 16.30 our very own Liz Nelson will be speaking at an event in London that aims to bring together gender and tax justice advocates to highlight the need for coherent and gender-responsive fiscal policies to safeguard the rights of women and girls both in the UK and globally. The […]


Historic event on women, human rights and tax justice in Bogota

BogotaLast week civil society organisations, researchers, labour union activists and policy makers met in Bogota, Colombia to explore how tax justice issues can ensure governments, multinational corporations and others meet their obligations to women in order to secure their full range of human rights. The Women’s Rights and Tax Justice conference opened with a conversation […]


The Offshore Wrapper: the Panama Papers, one year on

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceWelcome to the Offshore Wrapper – your weekly update from TJN.  Happy Paniversary! This week it’s been one year since the Panama Papers were leaked, and a number of organisations around the world have been marking the occasion though the global week of action for tax justice. In London, activists from the TJN and the […]


Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top