QUESTION 3 6 MARKS Outline ONE injury or possible injury to

QUESTION 3: 6 MARKS Outline ONE injury (or possible injury) to regional economies, which might have been caused by the OECD actions. (2 marks) a. Can the region benefit from the experience, and if so, how? (4 marks)

Solution

OECD updates a model tax convention that serves as a base for bilateral negotiations for tax coordination and cooperation. It states out a norm that allocates the primary right to tax the economy from where the investmnet originates ,ie, from home country and not the country where the investment is made,ie. host country.

As a result of this action there is much of disparity in terms of investments made by various countries.

This action is very effective between the countries where recioprocal investment flows take place, ie. between OECD member countries, but discourages the investment from a weak country to the developed economies.

The region would benefit as it encourages the investment amongst the OECD countries but at the same time it discourages the other weak countries to invest in OECD countries.