The English language often lags scientific progress. We still ‘turn on the radio’, even if none of us have seen a dial in years. When my kids were growing up, I always reminded them to ‘pull the chain’ even though toilet flush mechanisms had long been more user-friendly. And today, our computers offer us the opportunity to ‘cut and paste’ when there isn’t a pair of scissors or tube of glue in sight.
Early in my career, cutting and pasting was the standard way a kidnapper combined letters taken from a newspaper into a ransom demand, and a tax adviser pulled the disjointed components of a document together into a work of art that could demand a ransom. As we went (the ‘we’ being tax advisers rather than kidnappers), we deleted and replaced inconsistencies of language with red biro, and sent the resultant scrolls down to the soon-to-be-cursing typists.
Well, thanks to Word, those days are long numbered – but something close is going to hit the tax world like a tsunami next year (in fact it has already hit – but in very limited circumstances).
The Multilateral Instrument (MLI) – that won wide praise for the fact that it happened at all – is going to make a lot of people’s lives (including mine) a misery, and no amount of Microsoft wizardry is going to lift spirits; the Gettysburg Address was a magnificent eulogy – but it didn’t help the poor fellows buried there.
For the uninitiated, the MLI is a 49 page document of semi-comprehensible English and French that modifies bilateral tax treaties without the need for excruciating bilateral negotiations. Over a hundred countries signed up to the basic wording (the latest entries into force, in the last fortnight, are Malta and Singapore), with multiple choice opportunities for certain clauses, the right to exclude other clauses or sub-clauses that are satisfactorily covered in a specific bilateral treaty, and the right to ignore yet other clauses. There is also a right not to include another country (Israel has, for example, so far excluded the UK, and only the UK). The document deals – as part of the BEPS project – with hybrid situations, treaty abuse, avoidance of permanent establishment status, dispute resolution and arbitration. If you want a feel of how complicated it is – the section entitled ‘Simplified Limitation of Benefits’ runs to four and a half pages.
But that is not the difficult bit. If, for example, an Israeli adviser is going to consider a transaction with one of Israel’s 54 treaty partners that are not the UK, after establishing whether and when that partner has signed up to the MLI, it is necessary to shoe-horn the relevant sections into the bilateral treaty, update specific sub-clauses, and then try and make sense of the different language styles and terminology without the benefit of a red pen – each change depending on the options the other side has chosen along the way. Cutting and pasting gone mad.
The OECD is making efforts to make it all easier with an MLI Matching Database (Beta) which, at least, should obviate the need to view both country’s details with a split screen. Mind you, the OECD’s I-know-nothing disclaimer means it will also all need to be checked manually anyway. And, in any event, the cutting and pasting as well as different language are still there.
The only long-term answer will be for some enterprising professional (probably a legal and tax publisher) in each country to produce updated treaties that read in one go from beginning to end.
I suppose we should be grateful that, with the United States not on board and the UK leaving Europe, they didn’t just do the whole damn thing in French.