Random Thoughts on the Most Favoured Nation Clause in Avoidance of Double Taxation Agreements

The growth of bilateral, multilateral and regional trades has gained increased 
traction in recent times thereby giving rise to a proliferation of trade agreements. 
In International economic relations and multilateral trading systems, one of the 
cornerstone features is the Most Favoured Nation Clause (“MFN”). Generally, the 
import of the Most Favoured Nation (MFN) clauses is to link trade agreements by 
ensuring that the parties to one treaty provide treatment no less favourable than 
the treatment they provide under other treaties in areas covered by the clause. 
MFN Clause in international economic relations is a non-discriminatory trade 
policy. Characteristically, MFN clauses come in a variety of forms and in relation 
to diverse subjects. From historical point of view, MFN clauses were often 
contained in bilateral treaties of friendship, commerce and navigation whose 
main function was to regiment a variety of ma ers between the parties which 
were usually commercially driven in nature. Given this basis, homogeneous 
interpretation or application could not certainly be expected. Hence this article is a 
restrictive a empt to explore thoughts on MFN clause in the context of avoidance 
of double taxation agreements. MFN clause in tax treaties intends to stimulate 
non-discrimination and parity in business and investment opportunities among  treaty partner countries. In the course of time, different tax treaty models have 
been developed to wit: United Nations Model Double Taxation Convention 
between Developed and Developing Countries United (“Nations Model 
Convention”), the Organization for Economic Co-operation and Development 
Model Tax Convention on Income and on Capital (OECD Model), African Tax 
Administration Forum (ATAF), and Nigerian Model of Avoidance of Double 
Taxation. In principle, mischief that the tax treaty seeks is laudable and it is to 
ensure incredible potentials. However, the salient question in light of recent 
disputes arising from tax treaties executed by both South Africa and India with the  
Netherland is whether parity in business by way of reducing taxation is 
achievable between high-income and low-income parties to tax treaties. This 
article is a random review of basic topical subjects and contemporary issues 
relating to the MFN Clause in avoidance of double taxation agreements. Another 
limitation of this article is that it does not seek exegetical analysis of the MFN 
policy but rather a brief inquiry.