handbook-tb

Adolfo Martín Jimenézof the OECD Model Convention. This is because the nature of the historicalconfiguration of the PE concept as currently supported by theOECD cannot be changed: if this concept, for the reasons mentionedabove, produced a disconnect between the economic presence andtaxation rights of the source country, it would not be possible for thenotion of artificial avoidance of PEs to make a consistent contributionto an alignment of those concepts in a manner not suggested by the PEnotion itself. Full alignment of the source-country economic presenceand taxation rights can be achieved only through changes in the conceptof PE or by using other tools, not by reinterpreting it or by forcingthe acceptance of anti-avoidance rules.Not all countries have readily accepted this status quo.Ambiguity and lack of clarity in the Commentary on Article 5 ofthe OECD Model Convention have fostered attempts to rebalancethe alignment of economic presence and taxable rights with regardto PEs by, more or less, aggressive interpretation of the Commentaryon Article 5 of the OECD Model Convention. In this respect, theCommentary — unclear or contradictory as it may be after evolvingover half a century — allows room for manoeuvre, but States shouldknow that “interpretations” of Article 5 and its Commentary thatassume too aggressive an approach may place them in an awkwardsituation from an international perspective.These conclusions basically mean that focusing on artificialavoidance of PEs may not be of much help to those developing countriesthat seek more source taxation. Moreover, to the extent that theoutcome of Action 7 assumes the historical pillars of the PE conceptand corrects only some extreme cases so as to give source countriesmore, albeit very limited, taxing rights, it will not contribute to theachievement of a more balanced result. As a consequence, developingcountries should focus on avoidance of PEs rather than on artificialavoidance of PEs if they would like to increase their power to tax theeconomic activity taking place within their borders. The followingsections explore the options available to them, although the concept ofPE in the United Nations Model Convention is studied first.370