International tax treaty dispute resolution, the mutual agreement procedure, and the promise of mandatory arbitration for developing countries

The success of tax treaties must be partly attributed to their almost universal dispute resolution mechanism, known as the Mutual Agreement Procedure. Yet, the procedure has come under ample criticism due to a lack of finality, long duration, and scant taxpayer participation. Reform of the procedure through a complement of mandatory arbitration seemed to remedy these deficits but has not been widely adopted. This Chapter tracks the opposition to tax treaty arbitration, especially among developing countries, to a lack of trust in the international tax regime rather than to arbitration itself. It consequently presents a pathway to arbitration-based reform that should win legitimacy among all countries, including the developing economies.