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The Andean Question: Two Pillars, Two Sides?

Posted on Sep. 27, 2021
Lucas de Lima Carvalho
Lucas de Lima Carvalho

Lucas de Lima Carvalho is a professor of international tax law at the Brazilian Institute of Tax Law. He holds a doctorate in economic and financial law from the University of São Paulo in Brazil and an LLM in international taxation from New York University.

In this installment of Ahead of Tax, Carvalho looks at the impact of recent OECD initiatives on the Andean Community, focusing on Bolivia, Peru, Ecuador, and Colombia, and considers the implications for the multilateral treaty being discussed as an implementation tool for pillars 1 and 2.

Many of the 140 OECD inclusive framework jurisdictions are members of smaller, more restricted political groups. Those include economic cooperation communities like the Caribbean Community (CARICOM), common markets such as the EU and Mercosur, and regional councils like the Nordic Council and the Cooperation Council for the Arab States of the Gulf (GCC).

It is expected that inclusive framework commitments will have to coexist — for lack of a better term — with established obligations that jurisdictions have as members of their political groups. Think of action 6 of the base erosion and profit-shifting initiative: While the OECD proposed a principal purpose test (PPT) to be added to existing tax treaties, the EU passed its own anti-tax-avoidance rules (Council Directive (EU) 2016/1164 (ATAD 1)), which, unlike the OECD’s PPT, target non-genuine arrangements.

Yes, members of a political group might choose to change the group’s internal structure or tax agreements to accommodate OECD recommendations, but that requires a joint effort. One factor that may contribute to success is the proportion of group members that are also part of the inclusive framework (and opted to commit to specific proposals). The more members of both groups, the more avenues for alignment.

In light of that, consider the peculiar case of the Andean Community. Unlike Mercosur, with all four of its members in the inclusive framework,1 or the GCC, with five of its six members in the inclusive framework,2 there seems to be a clear line separating Andean Community members: Colombia and Peru are members of the inclusive framework and on July 9 formally joined the statement on pillars 1 and 2. Bolivia and Ecuador, on the other hand, not only have not signed onto the statement but are also not part of the inclusive framework. What is more intriguing is that Bolivia, Colombia, Ecuador, and Peru are all signatories to the same multilateral tax treaty, one of the few of its kind. Given that pillar 1 might modify the apportionment of taxing rights over corporate profits (or at least multinationals’ profits above a threshold), and that pillar 2 might require jurisdictions to either adopt or accept responsive rules against global anti-base-erosion regime recalcitrants, one may wonder how those new standards can coexist with a multilateral tax treaty signed by two countries that committed to follow them and two countries that have not.

This article explains the possible paths Bolivia, Ecuador, Peru, and Colombia might take on recent OECD initiatives — chiefly, pillars 1 and 2 — and what implications any political divide could have for the new multilateral treaty being discussed as a way to implement the pillars.

The Andean Community’s Multilateral Tax Treaty

Previously known as the Andean Pact, the Andean Community was founded by the Cartagena Agreement of 1969 among five countries: Bolivia, Colombia, Ecuador, Peru, and Venezuela. The agreement is meant to promote members’ development in equality, accelerate growth and employment, and facilitate their participation in a regional integration process to gradually form a Latin American common market. Efforts to develop the Andean Community must lead to a fair distribution of benefits derived from the integration of member countries in such a way that differences between them are reduced.

According to the Cartagena Agreement, the Andean Community is built on a network of regional institutions called the Andean Integration System, which includes a regional parliament, a regional court of justice, several councils, and a university. In 2020 Community Secretary-General Jorge Hernando Pedraza said those institutions are facilitating trade, digitalizing administrative procedures, supporting the restoration of manufacturing capabilities post-COVID-19, exchanging information and so-called good administrative practices, and strengthening cooperation systems among member countries.3 Those initiatives are political, yes, but they are also supported by a strong supranational legal system of nearly 900 community decisions to date.4

One example is Decision 578, which replaced Decision 40 and contains the multilateral tax treaty signed in 2004 by community members. After Venezuela’s April 2006 decision to leave the community,5 the treaty remained in effect for the other four Andean countries.

The contents of the Andean treaty are different from the OECD and U.N. model conventions in important ways — for example, it has exclusive taxing rights on passive income for source jurisdictions, a broader definition of source taxing rights over business profits, and a more inclusive nondiscrimination clause.6 Also, six years after the conclusion of the OECD BEPS action plan and four years after the release of the BEPS multilateral instrument, the Andean treaty has not implemented a single BEPS-related update — not even the minimum standards package.7 Its title still refers solely to fighting tax evasion (instead of evasion and avoidance), its structure does not contain any PPT or limitation on benefits clause, and its mutual agreement procedure has yet to be modified by BEPS action 14.

Thus, it seems clear that the Andean multilateral treaty is to an extent detached from today’s bilateral tax treaty landscape, which follows the OECD or U.N. model convention, as well as from the BEPS action plan and its proposals. That serves as a background to the country-by-country analysis in the sections below, arranged according to the perceived degree of jurisdictional exposure to the current trends of international tax policy.

Bolivia

At close to $36.69 billion, Bolivia had the lowest GDP of the Andean Community in 2020.8 It is known for its exports of natural gas to Argentina and Brazil, and its economy minister, Marcelo Montenegro, recently said the country is looking to purchase up to four tons of gold each year (a plan that should be in place at least until the next general elections in five years) to help rebuild foreign reserves depleted since the COVID-19 pandemic.9

Bolivia also has the smallest tax treaty network of the Andean Community, with six treaties in addition to the Andean multilateral treaty.10 That is not coincidental: Bolivia is a landlocked country; its neighbors have more affluent economies; and for 14 of the last 15 years, its president was Evo Morales, a man responsible for the nationalization of the oil and gas industry in 2006.11 Morales also opposed a 2009 Andean Community initiative to sign free trade agreements with the EU,12 a position that Bolivia maintains to this day.13 It would be surprising if a country with that track record was party to a large network of tax treaties.

Bolivian tax authorities have not contributed (at least not directly) to any of the recent initiatives of international tax policy reform spearheaded by the OECD. Bolivia is not a member of the inclusive framework, has not signed or amended any treaty following the BEPS action plan, and has yet to state any official position on pillars 1 and 2.

In theory, Bolivia has had access to OECD proposals via the Inter-American Center of Tax Administrations (CIAT), an organization with most of its members from the Americas that encourages international cooperation among tax authorities.14 In practice, however, Bolivia and OECD tax policy seem miles apart, except when it is politically convenient for them to seem aligned. One example is the recent VAT proposal to tax digital services provided in Bolivia by foreign multinationals. Oddly enough, even though the OECD is pushing countries away from digital services taxes (favoring instead a multilateral solution under pillars 1 and 2), Montenegro claimed that requiring foreign multinationals to register with local tax authorities — as opposed to requiring the incorporation of a local subsidiary — is a measure endorsed by the CIAT, WTO, and OECD.15

In light of that, even though the country is outside the inclusive framework, one should consider whether Bolivia will have any incentive to adopt or accept the multilateral treaty being discussed as an implementation tool for pillars 1 and 2. When it comes to taxing the digital revenues of large multinationals, Bolivia seems to prefer using its VAT as a surrogate DST — at least, that is the impression, given the recent proposal from the Ministry of Economy. If that proposal becomes law, it may be difficult to convince Bolivian lawmakers to sign any sort of multilateral treaty to implement pillar 1.

Bolivia’s general corporate rate is 25 percent (even though the taxable base is restricted to source income),16 which exceeds the 15 percent global minimum rate preliminarily agreed to by the G-20. Unless that nominal rate is reduced to an effective rate below 15 percent via local subsidies (or unmitigated tax planning schemes), it is unlikely that Bolivia would find itself on the receiving end of the retaliatory measures in pillar 2. The question then becomes whether Bolivia would want to sign the multilateral treaty anyway to use those measures against other countries, which also seems unlikely. Bolivia had every opportunity to adhere to portions of the BEPS action plan targeted at country (as opposed to taxpayer) practices, including the minimum standards of actions 5 and 6. It has never opted to participate in peer reviews of those actions, and one could argue that peer reviews are a much milder, less diplomatically challenging type of political effort than the kind of retaliation anticipated under pillar 2. Also, the effect pillar 2 would have on the domestic tax policy worldwide — especially on low-income countries with insufficient natural resources and poor infrastructure that will find themselves pressured to increase their corporate tax rates — seems to be exactly the kind of foreign threat to national sovereignty that Bolivia has attempted to distance itself from in the international arena.

Ecuador

With a growing consumer market and stable agribusiness sector, Ecuador has the third highest GDP of the Andean Community at around $98.8 billion.17 It is the only country in South America to use the U.S. dollar as its official currency, a measure adopted in 2000 to overcome a severe economic crisis.18 That might somewhat explain why Ecuadorian foreign policy has shown less resistance to trade agreements with developed countries, at least in recent years: In 2017 Ecuador joined Peru and Colombia in a trade agreement with the EU,19 and in late 2020, it signed a new protocol on trade rules and transparency with the United States.20

Ecuador has the largest tax treaty network of the Andean Community, being party to 20 treaties (with partners as varied as China, Qatar, and Switzerland), some of which were signed or amended after the conclusion of the BEPS action plan.21 Even though Ecuador is not a member of the inclusive framework, its tax administration has had experience with OECD proposals in BEPS actions 2, 6, and 14 via signing tax treaties with Belarus and Russia in 2016 and with Japan in 2019. In 2018 it adopted the OECD Convention on Mutual Administrative Assistance in Tax Matters and the common reporting standard. Those are signs that, unlike Bolivia, Ecuador seems willing to participate in the current wave of global tax policy reforms alongside other countries.

There are reasons to believe that Ecuador may join the inclusive framework and agree — even if only as a matter of principle — with the reforms under pillars 1 and 2. True, the country has a 12 percent VAT on digital services, which would be incompatible with pillar 1, but its general corporate rate is 25 percent, which should not cause concerns under pillar 2 unless it results in an effective rate of 15 percent or less.22

However, Ecuador’s political landscape has recently changed. Its new president, Guillermo Lasso, represents a pro-market, liberal break from nearly 15 years of center-left politics under the PAIS Alliance. In June Lasso used his power to re-sign the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID), a treaty denounced in 2009 by former Ecuadorian President Rafael Correa on the grounds that it violated Ecuadorian national sovereignty.23 If Lasso re-signed the ICSID, a treaty that sacrifices sovereignty to align with a global framework, he might also favor Ecuador’s alignment with the OECD.

Peru

At a little over $202 billion, Peru has the second highest GDP of the Andean Community.24 As in other countries, Peru’s GDP decreased in 2020 because of the impact of COVID-19, but as of September 20, the country had the highest number of deaths per million people (more than 6,123 deaths per million).25

President Pedro Castillo and the Peruvian government are aware of the many public health and economic challenges brought by the COVID-19 pandemic. Peru’s economy is expected to grow by about 10 percent in 2021 following tax and public spending reforms.26 That rebound effect will rely on the performance of key Peruvian industries, such as mining; construction; and commerce, including e-commerce and digital services.27 The country has witnessed its fair share of tech start-ups founded in recent years28 and is among many Latin American jurisdictions trying to balance fiscal stimuli and taxation to become a sustainable hub for digital economy entrepreneurs.

Peru has signed eight tax treaties based on the OECD model,29 which puts it far behind Ecuador in terms of network strength. Unlike Ecuador, however, Peru has been a member of the inclusive framework since December 2016. It became a signatory to the MLI in June 2018 and has since signed a treaty with Japan (in November 2019) that incorporates a PPT clause, as well as recommendations from BEPS actions 2, 7, and 14. Finally, after a minor — but noticeable — delay,30 Peru decided to join the statement on pillars 1 and 2 alongside other inclusive framework members.

Having said that, even though Peru is a member of the inclusive framework and seems to be on board with the OECD pillars, I would posit that its position is more of a general nod to international tax cooperation than an actual tax policy necessity. Take pillar 1, for example. Peru has toyed with the idea of imposing a VAT on business-to-consumer digital services for a while, with a failed attempt in 2019 followed by another bill in September 2020.31 If the budgetary pressure following COVID-19 pushes that plan through, Peru will find itself in a situation similar to that of Ecuador: having implemented a solution incompatible with the redistribution of taxing rights forecast under pillar 1. Only if the new VAT proposal fails will Peru be in the right position to benefit from the OECD’s work on pillar 1.

For pillar 2, yes, the country’s general corporate rate is 29.5 percent,32 which means it should be favorable to retaliating jurisdictions that either do not tax corporate income or tax it below the agreed global minimum rate. However, like other members of the Andean Community, Peru is a capital importer rather than exporter. Peruvian tax authorities are far more likely to challenge a lack of tax withholding than the lack of source taxation of inbound capital flows. What that means in practice is that Peru may agree with the retaliatory measures proposed under pillar 2 not because it will apply them, but because being labeled a noncooperative country by the inclusive framework could be detrimental to its economic interests in the long run.

Colombia

Of the Andean Community, Colombia is the only OECD member (in addition to being a member of the inclusive framework since its inception).33 Colombia is known for its exports of crude and refined petroleum, coffee, and gold, particularly to the United States and China, and its internal consumer market has been growing.34 Those factors contribute to its having the highest GDP of the four Andean countries at over $271 billion.35

Colombia has endured a period of political stability that is unusual both in the Andean Community and in Latin America as a whole. Although COVID-19 has created pressures for the government, it is fair to say that at least at the national level, Colombian politics have displayed the sort of democratic alternation of power in recent years that countries like Bolivia and Ecuador long for.36

That may be at the root of Colombia’s successful campaign to become a member of the OECD: The process took nearly seven years and involved an assessment of the country’s domestic policies by OECD experts in fields as varied as health, trade, corporate governance, and consumerism.37 Enduring that for seven years under different national governments required commitment and stability, traits that Colombian politics exhibited during the process.

Apart from the Andean multilateral treaty, Colombia has a modest network of 14 tax treaties (which includes Japan and the United Kingdom but not Brazil, China, or the United States), not all of which are yet in force.38 Although those numbers demonstrate that OECD membership does not require a vast tax treaty network, they also show that members of the OECD and inclusive framework can contribute to cooperative efforts without completely sacrificing their positions on international tax policy.

Colombia joined the MLI in 2017 (halfway through its process of entry into the OECD) but rejected all the mandatory binding arbitration provisions in articles 18 to 26.39 That sort of selective support for OECD proposals could play a role in Colombia’s actions on pillars 1 and 2.

That said, I expect Colombia to support the pillars’ core elements. Regarding pillar 1, although Colombia’s VAT has been applied to imported digital services since 2018,40 the country’s internal consumer market is growing. Ensuring VAT is collected by multinational enterprises providing digital services to local consumers might be burdensome for Colombian tax authorities — it requires continuous monitoring of taxpayers’ activities and of the evolution of online platforms and their payment processing structures. That provides Colombia with a narrative to support an international effort to redistribute taxing rights: Compared with the country’s VAT, it seems less burdensome for local tax authorities to rely on an international framework promoted by the OECD and peer-reviewed by other countries to ensure market countries obtain a fairer (or any) share of MNEs’ profits.

Regarding pillar 2, Colombia’s nominal corporate rate is 31 percent and scheduled to be 30 percent in 2022.41 Provided the application of corporate tax does not result in a rate below the agreed global minimum rate, it is unlikely that Colombia would find itself on the receiving end of the pillar’s retaliatory rules.

What about applying those rules to payments made to or received from residents of other jurisdictions? I believe that Colombia’s recent induction to the OECD may tip the scales in favor of adhering to pillar 2. Sure, like other countries in Latin America, Colombia is more of a capital importer than exporter, and one could argue that its denial of specific MLI provisions could signal a degree of caution toward OECD proposals. But there is a key difference between rejecting MLI articles 18 to 26 (which could be viewed as an attempt to preserve sovereignty over tax disputes) and rejecting the retaliatory rules under pillar 2 (which could signal acceptance of other countries’ retaliations, but Colombia would be powerless to oppose them whether it agreed with pillar 2 or not), which is why I would not read Colombia’s MLI positions as a possible rejection of the part of a multilateral treaty dedicated to pillar 2.

Andean Treaty vs. Treaty for Pillars 1 and 2

There is still a lot of mystery surrounding the future multilateral treaty the OECD will use to promote the implementation of pillars 1 and 2. We assume it will be a treaty superimposed on preexisting treaties, much like the MLI. OECD model provisions that might be affected by the new treaty include articles 5 (permanent establishment), 7 (business profits), 24 (nondiscrimination), 25 (MAP), and 29 (entitlement to benefits).42 The most recent Andean treaty dates to 2004 and contains simplified versions of all those articles. Although it does not have a PPT or LOB clause, a sentence in article 20 (interpretation and application) states that nothing in the treaty will prevent member states from applying their domestic laws to fight tax evasion and fraud.

Of course, any modification of the Andean treaty requires the agreement of its four signatories. As explained, while Colombia and Peru are members of the inclusive framework and participate in the OECD initiatives on pillars 1 and 2, Bolivia and Ecuador are not part of the inclusive framework and have yet to issue official statements on the pillars. The question is: Would Colombia and Peru be able to remain parties to a treaty that does not abide by pillars 1 and 2, or would the Andean treaty be able to block the redistribution of taxing rights over profits of MNEs or the application of retaliatory rules in pillar 2?

That is a complex question, much more so because of its importance in the role Andean Community members hope to play in the redesign of the international tax system. Yes, it could be argued that much like BEPS minimum standards, the two pillars should apply only to members of the inclusive framework that adhere to their terms.43 That rationale does not apply to pillar 1, however, because its goal is to enable market jurisdictions to tax the income of MNEs that exploit them, with or without physical presence of any kind. Countries that disagree with pillar 1 may find themselves trying to tax income already distributed by and among their inclusive framework counterparts (which may in turn cause MNEs to reconsider selling to their residents, or resident MNEs to invert or simply exit). The rationale is also hardly applicable to pillar 2, because its propositional side (retaliatory rules) includes domestic legal tools. Regardless of how the OECD wants to design the pillar 2 multilateral treaty, inclusive framework members do not actually need it to apply rules like the income inclusion rule or its backstop, the undertaxed payments rule. The only wrinkle is that taxpayers might use preexisting tax treaty obligations (particularly about nondiscrimination) to challenge the application of those rules. From the standpoint of legal certainty, that means a multilateral treaty may be a better strategy for adopting them. Regardless, Bolivia and Ecuador may find themselves having to address the economic impact of pillar 2 without having agreed to its terms.

The problem is compounded by the peer pressure I expect to see growing in the inclusive framework for the adequate implementation of pillars 1 and 2. The injunctive sides of the two pillars are geared toward jurisdictions in general, not just those in the inclusive framework. Pillar 1 is designed to eliminate the need for DSTs, whereas a central element of pillar 2 is the global minimum tax on corporate income. It would be incompatible with those objectives for inclusive framework members to allow Colombia or Peru (allow in a diplomatic, political sense — the inclusive framework has no legislative power over the tax policy decisions of any of its members) to, on one hand, participate in the pillars’ benefits, and, on the other, argue that the Andean treaty prevents the enforcement of any injunction on nonparticipating countries like Bolivia and Ecuador. Although that seems like an obvious problem for the success of the two pillars, it may also be a problem for the Vienna Convention on the Law of Treaties, especially if one solution requires Colombia and Peru to disregard or not apply any provisions of the Andean treaty incompatible with the multilateral treaty used to implement the OECD pillars.44

I would posit that unlike a BEPS minimum standard, the implementation of pillars 1 and 2 affects the nucleus of international taxation as we know it. The decision before members and nonmembers of the inclusive framework is not whether to adhere to the pillars but whether to adhere to them as participants or face the implications of their injunctions as nonparticipants. MNEs do not have an unlimited pool of taxable profits available to jurisdictions where they operate or with which they have some sort of connection. Similarly, either a global minimum tax is applied (or enforced) everywhere or there will be further international tax competition between countries.

Final Remarks

The four Andean countries have different relationships with the OECD and the developed countries that put initiatives like pillars 1 and 2 on the agenda of international tax policymakers. As a point of reference, the OECD has so far released three peer review reports on the implementation of action 6. The two most recent reports show that Colombia and Peru have reported difficulties in modifying the Andean multilateral treaty to fit the minimum standard, an action that requires only that existing and future treaties include at least a PPT clause.45 Considering the BEPS action 6 final report was released six years ago, that shows that changing the Andean treaty so that it complies with OECD proposals is not a simple task.

The challenge with modifying provisions in a multilateral treaty is that more than two parties must be convinced of the utility of the modifications before they agree to them. The more signatories to a treaty, the more difficult it is to get everyone on board. The added layer of complexity presented by the Andean treaty is that only half of its signatories have declared themselves aligned with pillars 1 and 2. True, the countries that joined the OECD initiative are the wealthiest members of the Andean Community, but that means nothing if the domestic tax policies of the other countries involved are at stake. A clear example of that is what happened — or didn’t happen — with action 6.

The solution to that impasse is not to allow the Andean multilateral treaty to coexist as is with pillars 1 and 2, because that would generate tax asymmetries that would jeopardize the success of the initiatives proposed by the OECD. The solution is also not in a forceful implementation of pillars 1 and 2 against Bolivia and Ecuador’s will because that will create a nonsustainable relationship between those countries and the inclusive framework — if Bolivian and Ecuadorian tax authorities think the economic effects of their policy instruments are being curtailed by a supranational force against national interests, that could result in unilateral measures, opaque investment incentives, and overall social unrest, all of which are detrimental to the success of pillars 1 and 2. I believe the solution requires both countries to understand how the terms of pillars 1 and 2 affect their economies and accept those terms insofar as they can be legitimately justified as conducive to a fairer international tax system. That acceptance would be helped by a formal association with the inclusive framework but is not hindered if Bolivia and Ecuador choose not to join the group.

That may seem an abstract solution, but I do not believe it is. In terms of not joining the inclusive framework and still participating in OECD initiatives, there are recent precedents: Although not part of the inclusive framework, Cyprus and Kuwait signed the MLI in 2017 (Cyprus ratified it in 2020).46 Also, the OECD has signaled in the blueprints for pillars 1 and 2 that it will try to propose rules that accommodate the needs of developing countries, a tactic that may encourage more to join. Further, at the level of the Andean Community itself, it is incumbent on representatives of Colombia and Peru to establish a link between regional tax policy concerns and the promotion of international tax justice that legitimizes pillars 1 and 2 as tax policy proposals. If they want to preserve the functionality of the Andean multilateral treaty, they should encourage Bolivia and Ecuador to align themselves with the contents and implementation of pillars 1 and 2.

FOOTNOTES

1 Mercosur, “Mercosur Countries — States Parties” (last accessed Aug. 1, 2021); and OECD, “Members of the OECD/G20 Inclusive Framework on BEPS” (last updated Aug. 2021).

2 Kuwait is the only nonmember, but it has signed the multilateral instrument. See GCC, “Member States” (last accessed Aug. 1, 2021). See also OECD, supra note 1, and “Signatories and Parties to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting” (status as of Aug. 11, 2021).

3 Andean Community, “Dimensión Económico Social de la Comunidad Andina,” at 7 (2020).

4 Andean Community, “Documentos Oficiales: Decisiones” (last accessed Aug. 1, 2021) (in Spanish).

5 Clodovaldo Hernandez, “Hugo Chávez Retira a Venezuela de la Comunidad Andina,” El Pais, Apr. 20, 2006 (in Spanish).

6 For more on the nondiscrimination clause and its relation to other Andean Community agreements and jurisprudence, see Catalina Hoyos, “Non-Discrimination Under the Andean Community Law,” Kluwer International Tax Blog, Nov. 4, 2015.

7 Colombia and Peru have told the OECD that they are working with Andean Community authorities to incorporate antiavoidance rules like the PPT into the Andean treaty. See OECD, “Prevention of Tax Treaty Abuse — Third Peer Review Report on Treaty Shopping: Inclusive Framework on BEPS — Action 6,” at 78, 213 (2021).

8 World Bank, “Gross Domestic Product 2020” (last accessed Aug. 1, 2021).

12 TeleCinco, “Evo Morales Dice que las ‘Políticas de la Muerte’ de los TLC Han Dividido a la CAN,” June 22, 2009 (in Spanish).

13 European Commission, “Andean Community” (last updated July 27, 2021).

15 Bolivia Viceministerio De Comunicación, “Gobierno: El IVA a los Servicios Digitales Servirá Como Crédito Fiscal” (May 12, 2021).

17 World Bank, supra note 8. See also Bolsa de Valores de Quito, 2020 — Guía del Inversionista Extranjero 7 (2020) (in Spanish).

18 Sonja Rijnen, “Two Decades of the U.S. Dollar: Ecuador’s Experience,” LatAm Dialogue (Nov. 10, 2020).

19 European Commission, “Ecuador Joins EU-Colombia/Peru Trade Agreement” (Nov. 11, 2016).

20 U.S. Embassy and Consulate in Ecuador, “United States and Ecuador Sign New Protocol on Trade Rules and Transparency” (Dec. 8, 2020).

21 PwC, “Ecuador: Corporate — Withholding Taxes” (July 2, 2021).

23 Daniela Páez-Salgado and Emily Westphalen, “Ecuador Signs the ICSID Convention: Next Steps for Entry Into Force,” Kluwer Arbitration Blog, June 30, 2021.

24 World Bank, supra note 8.

26 BBVA Research, “Peru Economic Outlook. Second Quarter 2021” (Apr. 22, 2021).

28 See, e.g., “Peruvian Crehana Raises Largest Series B for Edtech in Latin America, Launches in Brazil,” Latin American Business Stories, Aug. 5, 2021.

29 PwC, “Peru: Corporate — Withholding Taxes” (July 22, 2021).

31 See Bnamericas, “Un Vistazo al Proyecto de Ley para Gravar los Servicios Digitales em Perú” (Jan. 20, 2021).

33 See Sara Danish and Norberto Martinez, “Colombia Joins the OECD — So What?” Global Americans, June 18, 2020. See also OECD, “First Meeting of the New Inclusive Framework to Tackle Base Erosion and Profit Shifting Marks a New Era in International Tax Co-Operation,” June 3, 2016.

34 OEC, “Country Profile: Colombia (2019)” (last accessed Aug. 16, 2021).

35 See World Bank, supra note 8.

36 For a more nuanced perspective on Colombian politics, including comments on the peace accord between the Colombian government and the Revolutionary Armed Forces of Colombia, see Freedom House, “Freedom in the World: Colombia” (last accessed Aug. 16, 2021).

38 PwC, “Colombia: Corporate — Withholding Taxes” (Aug. 17, 2021).

40 Actualícese, “Recaudación del IVA por Servicios Digitales, una Jugada que le Está Trayendo Dividendos a Colombia” (Apr. 2, 2019).

42 For further insight into the possible structure of the multilateral treaty for pillars 1 and 2, see Mary C. Bennett, “Contemplating a Multilateral Convention to Implement OECD Pillars 1 and 2,” Tax Notes Int’l, June 14, 2021, p. 1453.

43 That is debatable in itself. For instance, the BEPS minimum standards in action 6 require all inclusive framework members to adopt antiavoidance clauses in all their tax treaties, not just those between members. Either antiavoidance clauses (and, importantly, the same kind of clauses) become a staple of tax treaties worldwide, or we risk having to restart discussions on action 6 because of treaty-shopping strategies.

44 Colombia, Ecuador, and Peru have signed and ratified the convention, which says “every treaty in force is binding upon the parties to it and must be performed by them in good faith.” Bolivia has signed, but not ratified, the convention.

45 OECD, “Prevention of Treaty Abuse — Second Peer Review Report on Treaty Shopping,” 67/195 (Mar. 2020); and “Prevention of Treaty Abuse — Third Peer Review Report on Treaty Shopping,” 78/123 (Apr. 2021).

46 See OECD signatories, supra note 2.

END FOOTNOTES

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