Considerations of Treaties /Factors to be considered in making of treaties

  • Colllection of Tax — For example a person of US derives income from India, then as per provisions of tax treaty Indian Govt can approach US Govt. for collecting Tax of that person, as it is not necessary that every non resident person deriving income from India has to pay tax in India, so there is need of treaties that facilitates the collection of Taxes
  • Technology- Simply, a country having good technology will get more proportion in sharing of Taxes. For example if US and SL get into tax treaty then US will get more proportion as that country is technically more sound than SL. Proportion of tax sharing depends upon bargaining power of country.If a country wants to Import Technology from another country then they will settle for less tax proportion
  • Relationship- relation between two countries also decides the proportion of tax sharing. If the relation between two countries is sound then they will share the tax in manner that benefits both of them