handbook-tb

Graeme S. Cooperof the OECD Model Convention and sometimes to the text of theCommentary) to deal with a number of transactions that have beenidentified as currently causing problems:‣ ¾ Splitting of contracts for construction, exploration and similarprojects into several short periods so that no permanent establishment(PE) arises;‣ ¾ Labour hire arrangements;‣ ¾ Recharacterization of dividends to avoid source-countrytaxation;‣ ¾ Share transfers occurring just prior to dividend payments toaccess lower withholding tax rates in the hands of the recipient;‣ ¾ Transactions attempting to eliminate source-country taxationfrom the sale of shares in land-rich companies;‣ ¾ Replacement of the automatic tie-breaker rule for entities otherthan individuals with a case-by-case judgment by the competentauthorities; and‣ ¾ Prevention of abuse through the creation of a permanent establishmentin a third State.Some of these transactions are already examined in theCommentary on Article 1 of the United Nations Model Convention.2.5 Impact on existing treatiesThe recommendations will lead to proposed changes to the text ofthe OECD Model Convention, some of which may flow through tochanges to the United Nations Model Convention. Recommendedchanges to the Model Conventions will clearly be influential in thenegotiation of future treaties between States, but there is an obviousquestion about how to treat the text of existing treaties in the light ofthese recommendations.At this time, there is no easy answer to this problem. It is obviouslyimpractical for a country to renegotiate all of its existing treaties toinclude changes to the text proposed in the recommendations. However,minor adjustments to the terms of the treaty might be effected through aprotocol or exchange of notes between the competent authorities, where316