Beps PDF

Tax certainty and taxation of
international pension funds: The

complicating and costly role of
domestic courts
Dr John Azzi*
Abstract
Noting the heightened concern about tax certainty from ‘certain court decisions’
and recent updates to international tax rules designed to promote certainty in the
international taxation of pension funds, this article examines a UK and an Australian
court decision regarding the international taxation of pensions. It finds that despite
the different legal frameworks applying in each case, both decisions heighten
concerns about tax uncertainty by commonly employing a domestic approach to
construe the relevant international instrument, albeit that both decisions purport to
follow international customary rules of interpretation.
The article then concludes by reiterating an earlier suggestion that greater

predictability and certainty could well be achieved if an International Tax Court (ITC)
is established to propel and facilitate the uniform and consistent application and
interpretation of treaty obligations and add to the range of dispute resolution options
that were recently enhanced in the OECD Multilateral Convention to Implement Tax
Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) by the
inclusion of mandatory binding arbitration.
707
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708 (2019) 34_4 AUSTRALIAN TAX FORUM
.
* Senior Lecturer, Western Sydney University. This article has benefitted from the anonymous reviewer’s
comments.
This article was accepted for publication on 13 October 2019
1 Introduction
In March 2017, the International Monetary Fund (IMF) and Organisation for Economic
Cooperation and Development (OECD) released a joint report entitled Tax Certainty
(the IMF/OECD Report) in response to a request from the G20 Leaders at their summit
in Hangzhou, China in September 2016. The report was made “against the backdrop of
heightened concern about uncertainty in tax matters and its [adverse] impact on cross-
border trade and investment, especially in the context of international taxation.”1
Noting tax certainty is a “shared priority”2 of governments and businesses alike, the IMF/
OECD Report identified “many reasons” for the heightened concern, including “certain
court decisions; and updates to the international tax rules, such as through the G20/
OECD Base Erosion and Profit Shifting (BEPS) Project”.3 Specifically, “the lengthy decision
making of the courts, and their unpredictable or inconsistent treatment”4 were considered
as some of the most important drivers of uncertainty.
The priority of “enhanced tax certainty” was reiterated by the G20 Leaders with the Buenos
Aires Action Plan calling for “the OECD and IMF to report to Finance Ministers and Central
Bank Governors in 2019 on progress made on tax certainty.”5 The progress report was
published in June 2019. It found, consistently with the 2018 Update Report,6 that an
important way to promote greater tax certainty is to improve the clarity and application of
tax rules.7
In a separate but related development, the OECD is also working on a project that aims
to address tax uncertainty related to court cases. The aim is to identify the most disputed
articles of the OECD Model Tax Convention (MTC), on which the vast network of more
than 3000 bilateral tax treaties is modeled, and provide “additional Commentary and/or
guidance … to ensure consistent tax treatment by tax authorities and courts.”8
1. Tax Certainty: IMF/OECD Report for the G20 Finance Ministers (March, 2017), Executive Summary, p 5.
Available at: https://www.oecd.org/tax/tax-policy/tax-certainty-report-oecd-imf-report-g20-finance-ministers-
march-2017.pdf. Accessed 26 August 2019. (IMF/OECD Report)
2. Ibid.
3. Ibid.
4. Ibid, p 32.
5. IMF/OECD (2019), 2019 Progress Report on Tax Certainty, Paris, p 6. Available at www.oecd.org/tax/tax-
policy/g20-report-on-tax-certainty.htm. Accessed 26 August 2019. (2019 Progress Report)
6. IMF/OECD (2018), OECD?IMF Report on Tax Certainty – 2018 Update, Paris, p 15. Available at www.oecd.
org/tax/tax-policy/g20-report-on-tax-certainty.htm. Accessed 26 August 2019. (2018 Update Report)
7. 2019 Progress Report, p 47.
8. 2018 Update Report, p 11.
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TAX CERTAINTY AND TAXATION OF INTERNATIONAL PENSION FUNDS: THE COMPLICATING 709
AND COSTLY ROLE OF DOMESTIC COURTS
From an assessment of 51 countries’ tax dispute resolution processes, the OECD found
that, whilst the design of the processes in many countries is “good overall”, the systems
seem to falter during implementation with evidence suggesting that it is taking too long
to address disputed cases. A number of reasons for this were suggested, including the
complexity of international tax disputes (which are taking longer to resolve than anticipated);
the caution exercised by tax officials (who may perceive that quick resolution may result in
errors and taxes given away); the inadequate numbers or skill levels of tax administration
staff; or inadequacy of facilities (and related infrastructure) necessary to dispense justice.9
In 2017, the OECD MTC and the accompanying Commentary were separately updated
in line with changes recommended in the BEPS Project. These changes were “designed
to avoid the uncertainty arising from fragmented or unilateral action by achieving greater
cooperation and coordination in international tax matters.”10 Relevantly, the 2017 updates
make clear that residence of a ‘recognised pension fund’ (and thus entitlement to treaty
benefits) depends not only on the place where it is ‘established’ but on whether the laws
of that place also govern the fund. In this regard, the fund must also be established and
operated exclusively to administer or provide retirement funds.
The 2017 updates also included “robust and effective”11 dispute resolution procedures
recommended in BEPS Action 1412 and the Multilateral Convention to Implement Tax Treaty
Related Measures to Prevent Base Erosion and Profit Shifting (the MLI). The MLI came into
force on 1 July 2018. Developed as part of BEPS Action 15 by over 100 jurisdictions (the
ad hoc Group), the MLI provides ratifying jurisdictions with the means to swiftly update
their existing network of bilateral tax treaties to give effect to BEPS measures in an effort to
promote “more certainty and predictability for businesses, and [create] a better functioning
international tax system for the benefit of our citizens.”13 Notably, however, the US is not
a signatory to the MLI.
In view of the preceding, this article examines the recent updates to the OECD MTC
expounding when a ‘recognised pension fund’ will be considered a resident of a particular
Contracting state. It finds that the updates are unlikely to alleviate concerns about the
treaty residence of pension funds of international organisations, which is an issue of
“increasing importance.”14
9. 2018 Update Report, p 18.

10. IMF/OECD Report, p 10.
11. Ibid, p 7.
12. OECD (2015), Making Dispute Resolutions More Effective, Action 14 – 2015 Final Report, OECD/
G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. Available at: http://dx.doi.
org/10.1787/9789264241633. (BEPS Action 14 Report)
13. Statement of OECD Secretary-General, Angel Gurria, reproduced in OECD (2017) “Multilateral Convention to
Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting: Information Brochure”.
14. Chartered Institute of Taxation – Comments received in Public Discussion Draft: TREATY RESIDENCE OF
PENSION FUNDS (OECD, 2016), p 47. Available at http://www.oecd.org/tax/treaties/public-comments-
received-discussion-draft-treaty-residence-pension-funds.pdf. Accessed 20 March 2019. (CIOT Submissions)
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And that concerns are heightened in this regard by the recent decision in Macklin, where
the UK Upper Tribunal considered provisions in the UK-US Double Tax Agreement (DTA)
and found that a pension fund is ‘established in’ the country in which it is physically located
rather than in the State whose laws ‘regulate’ the fund.15
The discussion then considers the decision of the Australian High Court in Macoun, which
was handed down in the same year as Macklin and deals with nearly identical facts,
albeit involving a different legal framework. As will appear, despite the customary rules
for the interpretation of treaties in the Vienna Convention on the Law of Treaties 196916
(the Vienna Convention), the decision in Macoun heightens concerns about uncertainty
from the inconsistent application of decisions of other municipal courts expounding when
retirement benefits paid by an international organisation are exempt from domestic country
taxation for the purposes of the Convention on the Privileges and Immunities of Specialized
Agencies (“the Convention”).
At the very least, both decisions considered in this paper aptly illustrate the “important”,17
“complex and ambiguous”18 role of domestic courts in interpreting and applying
international obligations of countries that heighten concerns about tax uncertainty. Similar
concerns were expressed in an article published in 2018 where it was concluded that the
MLI “is unlikely to achieve its primary objective to improve predictability and certainty for
governments and businesses” in relation to fiscally transparent entities.19
The article then concludes by reiterating earlier calls for the establishment of an International
Tax Court (ITC) to add to the range of tax treaty dispute resolution options, which were
recently enhanced in the MLI by inclusion of the option of mandatory binding arbitration.
The option of litigating disputes in the proposed ITC is expected to, ultimately, reduce
the need to resolve complex and time-consuming international tax disputes in municipal
courts – the “Achilles’ heel”20 in the enforcement of treaty obligations.
The preceding is developed below as follows: Part 2 (Residence of Pension Funds)

examines the 2017 updates and explains why the decision in Macklin heightens concern
about the capacity of the updates to promote certainty in relation to the taxation of
pension funds. Part 3 (General Treaty Interpretation Principles and Macoun) considers the
decision in Macoun and finds it heightens concern about the modern and strictly literalist
approach to interpretation of international treaties adopted by the High Court. Part 4
(Concluding Observations) briefly summarises the preceding discussion and concludes
with observations about why and how the option of an International Tax Court would help
reduce uncertainty from resolution of treaty-based disputes in municipal courts.
15. Macklin v Revenue and Customs Commissioners [2015] UKUT 39. (Macklin UKUT)
16. Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 United Nations Treaty
series 331.
17. A. Tzanakopoulos, The Influence of English Courts on the Development of International Law, Oxford Legal
Studies Research Paper No. 62/2015, p 2. (Tzanakopoulos)
18. A. Roberts, Comparative international law? The role of national courts in creating and enforcing international
law (2011) ICLQ 57-92, p 61. (Roberts)
19. J. Azzi, “Impact of the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent
Base Erosion and Profit Shifting on the Taxation of Fiscally Transparent Entities under the Australia-UK Double
Tax Agreement”, [2018] British Tax Review 556-588. (Azzi (2018))
20. Roberts, p 58.
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2. Residence of Pension Funds

2.1 OECD 2017 updates
On 29 February 2016 the OECD released a Public Discussion Draft21 on the treaty residence
of pension funds in furtherance of paragraph 12 of BEPS Final Report on Action 6.22 The
latter foreshadowed additional work “to ensure that a pension fund should be considered
to be a resident of the State in which it is constituted regardless of whether that pension
fund benefits from a limited or complete exemption from taxation in that State.”
The Public Discussion Draft inserted a definition of “recognised pension fund” in Article
3(1) OECD MTC accompanied with changes to the Commentary on Articles 3 and 4 of the
OECD MTC. Specifically, new draft Article 3(1)(j) stated:
the term ‘recognised pension fund’ of a State means an entity or arrangement established
in that State that is treated as a separate person under the taxation laws of that State and:
(i) that is constituted and operated exclusively to administer or provide

retirement or similar benefits to individuals and that is regulated as such by that
State or one of its political subdivisions or local authorities; or
(ii) that is constituted and operated exclusively to invest funds for the
benefit of entities or arrangements referred to in subdivision i).
The draft Commentary on the new definition explained that an entity that is a ‘recognised
pension fund’ will now be “considered as a resident of the Contracting State in which
it is established”23 for purposes of Article 4(1) OECD MTC. To avoid the possibility of
manipulation by private companies masquerading as pension funds, the draft Commentary
further added that to constitute a recognised pension fund the entity must be subject
to the law of the State in which it is established and be “recognised by law as a vehicle
constituted to finance retirement benefits for individuals and be subject to conditions
intended to ensure that it is used solely for that purpose.”24 This would include an agency or
an instrumentality of a State or a private company “regardless of whether that company or
entity is a person liable to tax (i.e., with respect to income not derived from the scheme)”.25
The extended definition of recognised pension fund in (ii) above was inserted to cover
entities used by pension funds to act as intermediaries for the investment of funds used to
provide retirement benefits to individual members of the pension fund.26
21. OECD (2016), Public Discussion Draft: TREATY RESIDENCE OF PENSION FUNDS. Available at: http://www.
oecd.org/tax/treaties/discussion-draft-treaty-residence-pension-funds.pdf. Accessed 20 March 2019. (Public
Discussion Draft)
22. OECD (2015), Preventing the Granting of Treaty Benefits in Inappropriate Circumstances, Action 6 – 2015 Final
Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, p 9. Available at: http://
dx.doi.org/10.1787/9789264241695-en. Accessed 20 March 2019 (Action 6 Final Report)
23. Public Discussion Draft, p 3.
24. Ibid, [10.6] p 4.
25. Ibid [10.7], p 4.
26. Ibid [10.8], p 5
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The public was invited to comment on the proposed changes, with the OECD receiving 29
submissions from industry and other representatives. Relevantly, a submission from the
1818 Society (the organization of World Bank Group alumni) requested the definition of
‘recognized pension fund’ “specifically include pension funds established by international
organisations … and that such pension funds should be treated as resident in the state
in which they are established or principally administered.”27 The Chartered Institute of
Taxation, similarly, was concerned that the new definition is “too narrow”28 in that it may
not necessarily apply to the pension plans of international organisations.
The Association of Global Custodians, on the other hand, suggested that the ‘separate
person’ requirement be removed from the definition of recognised pension fund to avoid
the new definition “inappropriately”29 excluding certain pension fund arrangements. In
particular, they were concerned about ‘contractual trust arrangements’ set up by employers
under German law to fund pensions benefits to employees, and pension schemes arranged
through insurance companies, which are quite common in the United Kingdom and are
known as “unit-linked pension funds”.
Meanwhile, on 21 November 2017 the OECD Council approved updates to the OECD
MTC and the Commentary to reflect changes agreed under the BEPS Project, including
comments received on the Public Discussion Draft. The 2017 updates changed the
definition of ‘recognised pension fund’ by substitution of the term “constituted” with the
term “established” and expanded it by inclusion of the words “almost exclusively” and
“ancillary or incidental benefits”. However, the separate person requirement was retained,
leaving it to contracting States to amend individual treaties, for example, via a Protocol
designating the preceding arrangements as recognised pension funds despite that they do
not constitute separate persons.30
Article 3(1)(i) OECD MTC now reads:

i) the term ‘recognised pension fund’ of a State means an entity or arrangement
established in that State that is treated as a separate person under the taxation
laws of that State and:
(i) that is established and operated exclusively or almost
exclusively to administer or provide retirement benefits and ancillary or
incidental benefits to individuals and that is regulated as such by that
State or one of its political subdivisions or local authorities; or
(ii) that is established and operated exclusively or almost
exclusively to invest funds for the benefit of entities or arrangements
referred to in subdivision (i).
The latest Commentary on Article 3(1)(i) explains that the addition of the “words
27. Comments received on Public Discussion Draft: TREATY RESIDENCE OF PENSION FUNDS (OECD, 2016),
p 4. Available at: http://www.oecd.org/tax/treaties/public-comments-received-discussion-draft-treaty-
residence-pension-funds.pdf. Accessed 20 March 2019. (Comments on Public Discussion Draft)
28. Ibid, p 46.
29. Ibid, p 7.
30. See, eg, the 2006 Protocol of to the US-German DTA, which included language to clarify that contractual trust
arrangements would be treated as pension funds.
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‘almost exclusively’recognise that a very small part of the activities of a pension fund might
involve activities that are not strictly related to administration or provision of such benefits
(e.g. such as marketing the services of the pension fund).”31 States are also free to adapt
the new definition so as to cover entities providing benefits not related to retirement (e.g.
disability pensions). This is made possible by insertion of the phrase “ancillary or incidental
benefits”.32
The new Commentary also makes clear that reference to the expression “arrangement” in
the above definition of recognised pension fund was inserted in acknowledgement of the
necessity to “adopt a broad formulation” to cover retirement benefits provided through, for
example, a trust, so long as it is “treated, for tax purposes, as a separate entity recognised
as a separate person.”33 With the requirement for the arrangement or entity to be ‘regulated
as such’ inserted to ensure that it is “recognised by law as a vehicle established to finance
retirement benefits for individuals and be subject to conditions intended to ensure that it is
used for that purpose.”34
Significantly, however, the updates do not contain a definition for the key term ‘established’.
Instead, authorities are expected to rely on the general interpretation rule in Article 3(2)
OECD MTC. This states that a term that is not defined in the relevant treaty shall have the
meaning it has under the tax law of the contracting State, “unless the context otherwise
requires or the competent authorities agree to a different meaning pursuant to the provisions
of Article 25” OECD MTC.
Article 25 institutes a mutual agreement procedure (MAP) for resolving treaty-related

disputes. It allows competent authorities some “leeway”35 in interpreting treaty provisions
where the context depends on the intention of the Contracting parties when signing the
treaty as well as the domestic law meaning of the particular term under consideration.
The 2017 updates also modify Article 4(1) OECD MTC by the addition of the words
‘recognised pension fund’ to “remove any doubt”36 that a recognised pension fund that
meets the definition in Article 3(1)(i) OECD MTC is resident in the State in which it is
established. Article 4(1) OECD MTC now states:
For the purposes of this Convention, the term ‘resident of a Contracting State’ means
any person who, under the laws of that State, is liable to tax therein by reason of his
domicile, residence, place of management or any other criterion of a similar nature,
and also includes that State and any political subdivision or local authority thereof
as well as a recognised pension fund of that State. This term, however, does not
include any person who is liable to tax in that State in respect only of income from
sources in that State or capital situated therein. (Emphasis added)
The Chartered Institute of Taxation suggests the above-emphasised words (‘as well as….’)
31. Commentary on art 3(1) OECD MTC, [10.11].

33. Commentary on art 3(1)(i) OECD MTC [10.9].
34. Commentary on art 3(1)(i) OECD MTC [10.14].
35. Commentary on art 3(2) OECD MTC, [12].
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are superfluous and, inappropriately, suggest that a recognised pension fund would not
normally be regarded as being subject to tax. Deleting these words, they say, would avoid
the risk of a recognised pension fund not being regarded as a resident of a particular State
where it could be “regarded as being liable to tax, but only in respect of locally sourced
income or capital”.37
Irrespective of the reasons why the 2017 updates to the OECD MTC do not incorporate the
various suggestions mentioned above, the following demonstrates, by reference to the UK
decision in Macklin, that they do not improve certainty in terms of resolving the fundamental
question of where a pension fund is established. As will appear, despite agreeing that the
rules of treaty interpretation in the Vienna Convention are rules of international customary
law, the tribunal at first instance and on appeal could not agree on the real intention of the
contracting parties in providing an exemption from domestic taxation for pensions under
the UK-US DTA.
2.2 The Macklin decisions

In Macklin, the taxpayer invoked Article 17 of the UK-US DTA to claim an exemption for
retirement benefits paid by the World Bank Group Staff Retirement Plan (SRP). Article 17(1)
of the UK-US DTA relevantly states:
(a) Pensions and other similar remuneration beneficially owned by a resident of a
Contracting State shall be taxable only in that State.
(b) Notwithstanding sub-paragraph a) of this paragraph, the amount of any such
pension or remuneration paid from a pension scheme established in the other
Contracting State that would be exempt from taxation in that other State if the
beneficial owner were a resident thereof shall be exempt from taxation in the
first-mentioned State. (Emphasis added)
Mr Macklin, a UK national, was employed by the International Bank for Reconstruction and
Development (the ‘IBRD’) (a member of the World Bank Group) in its US office from July
1976 until March 1998. He retired to the UK and was treated as a UK resident for purposes
of Article 4(1) of the UK-US DTA. Under UK domestic law, 90% of the pension payments
Mr Macklin received from the SRP qualified as income for UK tax purposes under s 575
Income Tax (Earnings and Pensions) Act 2003 (UK) (“the ITEP Act”). On the other hand, a
“favorable determination”38 by the US Internal Revenue Service (the ‘IRS’) treated the SRP
as exempt from US domestic taxation by virtue of its status as an international organisation.
In the preceding circumstances, the taxpayer argued Article 17(1)(b) of the UK-US DTA
operated to exempt the pension payments made by SRP from UK taxation. Specifically,
it was submitted that the SRP is a ‘pension scheme’ (as defined in Article 3(1)(o) of the
UK-US DTA39) ‘established in’ the US for the purpose of article 17(1)(b) of the UK-US DTA.
37. Comments on Public Discussion Draft, p 47

38. See Macklin v Revenue and Customs Commissioners [2103] UKFTT 554 (TC), per Judge Walters and Mr
Speller, at [59]. (Macklin FTT)
39. Article 3(1)(o) of the UK-US DTA defines “pension scheme” as “any plan, scheme, fund, trust or other
arrangement established in a Contracting State which is (i) generally exempt from income taxation in that
State; and (ii) operated principally to administer or provide pension or retirement benefits or to earn
income for the benefit of one or more such arrangements.”
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The UK revenue authorities disagreed and the taxpayer sought a review in the First Tier
Tribunal (the FTT) after the US and UK competent authorities had earlier failed to reach an
agreement under the MAP in Article 26 UK-US DTA (which is in substantially similar terms
to Article 25 of the OECD MTC).
The First Tier Tribunal decision
Based on expert evidence led at the hearing, the FTT ‘found as a fact’ that the SRP is
not considered as being ‘established in’ the US for the purposes of the UK-US DTA, as
a matter of US law. In those circumstances, the FTT said it would be “strange” that the
SRP would nevertheless be considered ‘established in’ the US as a matter of English or
UK law.40 Nevertheless, the FTT accepted that the US position is not “determinative of
(although it is relevant to)” the task of interpreting the expression ‘established in’, which,
they said, requires regard to Article 3(2) of the UK-US DTA (which is in substantially similar
terms to Article 3(2) of the OECD MTC). According to the FTT, what Article 3(2) requires is
to:
attribute to the phrase ‘established in’ a state the meaning which it has (or had at
the relevant time(s)) under UK law for the purposes of income tax or, failing such a
meaning, the meaning which it has (or had) under general English or UK law.41
In its “search for the real intention of the contracting parties in using the language employed
by them”,42 the FTT said that the language and structure of the Exchange of Notes of 24
July 2001, which were exchanged between the British and American Governments on
the day the UK-US DTA was concluded, is “very persuasive”. From these notes, which
provided a list of pension schemes the parties intended to be covered by the UK-US DTA,
the FTT discerned the parties intended for the phrase ‘established in’ to mean “established
under and in conformity with the relevant contracting state’s tax legislation relating to
pension schemes.”43
The FTT found that the SRP, which was created in 1948 by a resolution of the directors
of the World Bank (with the World Bank being SRP’s trustee), could not be regarded as
‘established in’ the US under US law despite that it “is an arrangement set up physically
in the USA”.44 This is notwithstanding that management and administration of the SRP
was carried out by the World Bank from its premises in Washington DC with the World
Bank’s governing documents extending to the SRP the privileges and immunities enjoyed
by the World Bank under the International Organizations Immunities Act of 1945 (US) and
the International Organisations Act 1968 (UK).45 These included that the SRP is generally
exempt from US income taxation.
40. Macklin FTT, at [103].

41. Ibid, at [104].
42. Ibid, at [103], relying on Inland Revenue Commissioners v Commerzbank AG [1990] STC 285
43. Ibid, at [105].
44. Ibid, at [107].
45. Ibid, at [79]. The privileges and immunities of the World Bank are discussed in some detail in Part III below.
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According to the FTT, the exemption from US taxation did not arise from US tax legislation
relating to pension schemes but rather from the privileges and immunities enjoyed by
the World Bank.46 The FTT went on to add that the SRP would not be considered, as a
matter of US law, to be established in the US given (i) an IRS determination letter dated 13
September 2002 recording that the SRP was not ‘created or organized in the US’, and (ii)
US courts not having supervisory jurisdiction over the administration of the SRP.
Moreover, the FTT did not accept that the intention of the parties in providing the exemption
in Article 17(1)(b) of the UK-US DTA was to ensure equal tax treatment of pensioners
resident in either contracting state. Rather, the intention is:
to give exemption in both contracting states to pension income which the parties to
the DTA have chosen to exempt from income taxation under their respective domestic
laws because they are schemes operated principally to administer or provide pension
or retirement benefits, etc.47
Turning to the interpretative task under Article 3(2) of the UK-US DTA, the FTT observed
that whilst it “would not be a misuse of ordinary language” to describe the SRP as
‘established in’ a contracting State for the purposes of Articles 3(1)(o) and 17(1)(b) of the
UK-US DTA as a matter of UK law, nevertheless, they held that because US courts did not
have supervisory jurisdiction over the SRP, the SRP did not have “sufficient legal nexus
with the USA to support the case that it is established in’ the USA for relevant purposes.”48
Subsequent commentary on the FTT decision, not unreasonably, asked “[w]hy it should
matter to the application of the treaty that a US court could or could not be involved, or that
US or non-US persons made the decisions?”49 However, another commentator expressed
surprise that the case was being discussed under the UK-US DTA at all and hoped that an
appeal will produce a better-reasoned outcome.50
Not surprisingly, the taxpayer appealed against the FTT decision to the Upper Tribunal,
which upheld the appeal. As will appear however, the decision on appeal was not,
ultimately, better-reasoned.
The UK Upper Tribunal (UKUT) Decision
Referring to well-settled authority that counsels against a “strictly literal construction”51 of

domestic legislation giving effect to or incorporating an international instrument, Newey
J in the UKUT was satisfied there is no uniform or technical meaning for the expression
‘established in’ under either US or UK domestic law for purposes of the taxes to which the
UK-US DTA applies.
46. Ibid, at [106].

47. Ibid, at [110].
48. Ibid, at [107]-[108].
49. Macklin v Revenue and Customs Commissioners (2013) 16 ITLR 355, 361 (commentary by J. F. Avery
Jones).
50. P. Baker, “United Kingdom: Michael Macklin v Commissioners for her Majesty’s Revenue and Customs”, in E.
Kemmeren, et al (editors) Tax Treaty Case Law Around the Globe 2014 (IBFD Publications, Amsterdam, 2014)
31-37, pp 36-37. (Baker (2014))
51. Fothergill v Monarch Airlines Ltd [1981] AC 251, per Lord Fraser at 285. (Fothergill)
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In these circumstances, his Honour said, Article 3(2) of the UK-US DTA was of “no help”.52
Unlike the FTT, which considered the Exchange of Notes to discern the real intention of
the contracting parties for purposes of Article 3(2) of the UK-US DTA, Newey J found
the Exchange of Notes “potentially compatible with each side’s case.”53 In any case, his
Honour was satisfied that the pension schemes listed therein merely provide illustrative (i.e.,
neither exclusive nor exhaustive) examples of the types of pension schemes contemplated
by the UK-US DTA.
More importantly, Newey J found that the FTT erred in basing its finding that the SRP was
not ‘established in’ the US for the purposes of the UK-US DTA on expert evidence. The FTT
had relied on expert evidence “in reaching a view (a finding of fact) on the meaning, as a
matter of US law, of the expression ‘established in’ with reference to a Contracting State,
where it appears in the DTA.”54
Newey J explained that Article 31 of the Vienna Convention “embodies customary

international law [that] provides for a treaty to be interpreted in accordance with the
‘ordinary meaning’ of its terms, albeit ‘in their context and in the light of the treaty’s object
and purpose”,55 and is “binding on all states”56 regardless of whether or not they are
parties to the Vienna Convention.
Reiterating that questions of treaty interpretation are for the court and not experts, with a
treaty provision having an autonomous meaning, Newey J found the expert evidence was
“neither relevant nor admissible.”57
Since a treaty provision has an ‘autonomous meaning’, [the expert] was in effect
being asked to express an opinion on the very point of interpretation that the FTT
had to decide.58
His Honour went on to explain that notwithstanding that procedural rules in the tribunal are
“looser”59 than in a court, the expert evidence was inadmissible because it was based in
part on a report prepared in 2003 for the Senate Foreign Relations Committee in advance
of the DTA’s ratification. Among other things, the report essentially observed that for the
purposes of the UK-US DTA a pension plan must ‘be established and recognised under the
law of one of the contracting States’.60
52. Macklin v Revenue and Customs Commissioners [2015] UKUT 39, at [34]. (Macklin UKUT)
53. Ibid, at [45].
54. Ibid, at [73].
55. Ibid, at [32].
56. Ibid, at [16], relying on Ben Nevis (Holdings) Ltd v HMRC [2013] EWCA Civ 578 per Lloyd Jones LJ at [17].
In Thiel v FCT (1990) 171 CLR 338, McHugh J (Brennan CJ, Mason and Gaudron JJ agreeing) explained (at
p 356) that “because the interpretation provisions of the Vienna Convention reflect the customary rules for the
interpretation of treaties, it is proper to have regard to the terms of the Convention in interpreting the [relevant
treaty] even though [the other contracting State] is not a party to the Convention.” (Thiel) See also Burton v
FCT [2019] FCAFC 141, per Logan J at [49]. (Burton)
57. Macklin UKUT, at [37].
58. Ibid, at [37].
59. Ibid, at [74].
60. Reproduced in Macklin FTT, at [68].
ATF 34_4.indb 717 11/1/20 11:06 am

The Revenue argued that the 2003 report constituted travaux preparatoires (i.e., preparatory
works leading to the conclusion of the treaty) that could be used as a “supplementary
means of interpretation”.61 Rejecting this submission, his Honour found that reliance
on the 2003 report was “cautiously endorsed” by the Vienna Convention with “little firm
authority in English law supporting [its] use ….”62 In England, courts consider use of such
material “should be rare” and only occur where the material is “public and accessible” and
“indisputably” points to a definite legislative intention.63
Unlike the position in the US, where “courts are in general more liberal in recourse to
legislative history than [English] courts”,64 Newey J was satisfied the 2003 Senate Foreign
Relation report could not be taken into account under English law. Whilst not clearly
explained, it may reasonably be inferred that the 2003 report was deemed inadmissible
because it applied interpretation principles that differ from those that “an English court
would have applied in accordance with the decision of the House of Lords in Fothergill v
Monarch Airlines”.65
In finding the SRP was established in the US (as this is the place where it was physically
set up), Newey J rejected submissions made on behalf of the UK Revenue suggesting it is
not apt to talk of a pension scheme “being ‘set up physically’ anywhere”66 when, in reality
it is no more than a life insurance contract. Instead, his Honour agreed with counsel for the
taxpayer that “a pension scheme had to be administered somewhere.”67
The better view, I think, is that Mr Macklin is right and (a) ‘established in’ refers to a
pension scheme’s physical location and (b) a pension scheme need not necessarily
be ‘generally exempt from taxation’ as such. That conclusion is consistent with both
the ordinary meaning of ‘established in’ and the fact that the DTA nowhere states that
a ‘pension scheme’ must be established ‘under or in conformity with the relevant
contracting states’ tax legislation relating to pension schemes’ or generally exempt
from income taxation ‘as a pension scheme’.68
Brian Cleave QC has criticised the Macklin decision, saying that “it cannot be right” that
the physical (i.e., geographical) location of the SRP is determinative of its residency status
when, in reality, it is “simply a bundle of rights and obligations, with the test of the situs of
an obligation, in common law at least, is where that obligation can be enforced.”69
61. Article 32 of the Vienna Convention.

62. Fothergill, per Lord Wilberforce at p 276.
63. Ibid, per Lord Wilberforce at p 278. See also Effort Shipping Company Ltd v Linden Management SA [1998] 2
WLR 206, ;per Lord Steyn at p 221. In Australia, use of non-publicly available material in deciding treaty cases
is, similarly, frowned on: Vann R., “Hill on tax treaties and interpretation” (2013) 28 (1) Australian Tax Forum
87-122, at p 120. (Vann (2013))
64. Fothergill, per Lord Wilberforce at p 277.
65. Cf IRC v Commerzbank AG [1990] STC 285, per Mummery J at p 302 (Commerzbank); followed in Macklin
UKUT, at [18] and [37].
66. Macklin UKUT, [41].
67. Ibid, at [42]. (Emphasis in original)
68. Ibid, at [46].
69. B. Cleave QC, “Pension from World Bank Staff Retirement Plan Tax Exempt in United Kingdom under the
United Kingdom-United States Income Tax Treaty (2001)” (2016) Bulletin for International Taxation 202, at p
207. (Emphasis in original)
ATF 34_4.indb 718 11/1/20 11:06 am

Curiously, the UK authorities did not appeal Newey J’s decision despite that it is a lower
court decision contradicting the position maintained by the Revenue and reflecting what
Philip Baker QC calls a “domestic approach”70 to treaty interpretation. This may be because
the authorities considered the decision would be overtaken by subsequent developments
associated with the BEPS Project.
As the following demonstrates however, the Macklin decision remains relevant

notwithstanding BEPS. It not only explains when and where an entity providing retirement
benefits will be treated as ‘established in’ a particular country for treaty purposes, but
that the incongruence of the Macklin decision and the 2017 updates and the domestic
approach employed to interpret the UK-US DTA, gives cause heightened concern about
how similar disputes will be resolved in the future. As may be recalled, Newey J considered
irrelevant and inadmissible the Senate Foreign Relations report and the expert evidence
showing the SRP was neither created nor organised under US law.
Macklin: A reason for heightened concern about dispute resolution in a BEPS world
Despite that the Macklin decision was handed down before the MLI came into force, it
is nevertheless expected to inform, complicate and prolong resolution of all future treaty
disputes regarding the taxation of pensions received by UK residents from foreign funds.
This is because the UK has signalled its intention for the 12171 DTAs it has concluded with
other countries to be modified in accordance with the MLI, including the UK-US DTA albeit
the US is not a signatory to the MLI; thus putting the UK-US DTA beyond the reach of the
MLI. A DTA can only be modified and become a Covered Tax Agreement (CTA) “to the
extent that both Contracting Jurisdictions have agreed that the MLI should apply to it”.72
Coming into force in the UK on 1 October 2018, the MLI automatically incorporates in a
“synchronised and efficient manner”73 the package of measures developed under the G20/
OECD BEPS Project, including updates to the OECD MTC and Commentary regarding
recognised pension funds. It follows that, apart from the UK-US DTA and the UK-Canada
DTA, which expressly excludes International Organisations74 (no doubt in recognition that
they are governed by a different regime), other DTAs concluded by the UK will now limit
entitlement to treaty benefits by reference to whether the paying entity is a ‘recognised
pension fund’ under Article 3(1)(i) and is a resident of the Contracting Jurisdiction for
purposes of Article 4 of the OECD MTC, as recently modified.
Notwithstanding that the MLI allows participating jurisdictions to swiftly and cheaply
modify their network of treaties in line with the 2017 updates, it also allows them to opt-in
and out of adopting particular MLI provisions, thus creating complicating and complex
mismatches.
70. P, Baker QC, “United Kingdom: Michael Macklin v HRMC” in M. Lang et al (Eds) Tax Treaty Case Law around
the Globe 2015 (IBFD, 2015), p 284. (Baker QC)
71. Refer http://www.oecd.org/tax/treaties/beps-mli-position-united-kingdom.pdf. Accessed 17 August 2019.
72. Azzi (2018), p 562.
73. Ibid, p 558.
74. See Macklin FTT, at [88].
ATF 34_4.indb 719 11/1/20 11:06 am

The notification mismatches and the fact that many treaty terms are undefined in either
the relevant treaty or the municipal law of the particular contracting State, as illustrated in
Macklin, will further add to the complexity and cost of dispute resolution in the BEPS world.
As discussed, an entity is a ‘recognised pension fund’ if it is ‘established and operated

exclusively or almost exclusively to administer or provide retirement benefits’. And it will
be a resident of the Contracting Jurisdiction whose laws govern it, or where that is the
place it was ‘created or organised’. It follows that as the final and authoritative word on the
matter, the Macklin decision will be highly relevant in expounding the undefined expression
‘established’ in Article 3(1)(i) of the OECD MTC.
To reiterate, Macklin is authority for the proposition that it is neither necessary to show a
pension scheme has sufficient legal nexus with a relevant Contracting state nor that it was
established in conformity with the law of that state before it is deemed resident in the State
in which it is physically located. This is in direct contrast to Article 4 of the OECD MTC,
which, as mentioned above, provides that a recognised pension fund will be resident in
the Contracting State where it is established and under whose laws it is liable to tax as a
separate entity.
The disparity between the Macklin decision and the recent OECD MTC updates is
expected to further complicate treaty disputes, generating much uncertainty and adding to
costs and time taken to resolve such disputes notwithstanding recent international efforts
to enhance the MAP dispute resolution mechanisms in the MLI. To date, MAP has been
largely ineffectual. It bears recalling that the litigation in Macklin arose precisely because
of the “embarrassing failure”75 of the UK and US competent authorities to agree under the
MAP in Article 26 of the UK-US DTA to resolve a simple dispute about the residence of
the SRP. Thus necessitating resort to domestic litigation, which is likely to continue, if not
increase, in consequence of the UK ratifying the MLI.
Although the MLI inserts a minimum standard for improving the MAP, including revisions
to the Commentary on Article 25 of the OECD MTC that clarify the importance of resolving
MAP disputes in “good faith” and in a timely, “fair and objective manner”, “this is unlikely to
… ‘bring about the changes required to address the growing number of deadlocked MAP
disputes’.”76 Rather, a “tsunami”77 of BEPS-related disputes is expected to arise, adding
further to “the mounting inventory of unresolved MAP cases arising out of difficulties with
the application and interpretation of tax treaty provisions.”78
More, however, the attempt to coerce tax authorities to reach agreement through the threat
of mandatory arbitration (which 28 countries, including the UK, have now taken up) is
unlikely to result in significant reductions in the number of unresolved MAP disputes. This
is due largely to the low take-up rate, the lack of transparency in the arbitration process
and the fact that an arbitration decision may be rendered invalid by a ‘final decision’ of the
75. Baker QC, p 285.

76. Azzi (2018), p 578. (Footnotes omitted)
77. T. Welty, M.P. Thomas, L.L. Gavioli and C.H. Lowell, “Preparing for a Tsunami of International Tax Disputes”
(2015) 80 Tax Notes International 1047, p 1049.
78. Azzi (2018), p 558.
ATF 34_4.indb 720 11/1/20 11:06 am

domestic courts of either Contracting Jurisdiction in circumstances where dissatisfied

taxpayers can pursue ‘litigation on the issues which were resolved in the mutual agreement
implementing the arbitration decision in any court or administrative tribunal’.79
Indeed, it is expected that future disputes involving similar facts to those arising in Macklin
will be similarly litigated despite the best endeavours of the OECD to achieve “more
certainty and predictability”80 in the international tax sphere. In any case, the recent OECD
updates would not have applied to produce a different result in Macklin given the UK-US
DTA will not be modified by the MLI. And even if the MLI did apply, the fact remains that the
term ‘established’ is not defined in either the OECD MTC or the Commentary.
Although the Commentary may be regarded as the “most comprehensive source of

information likely, if not to determine, then to influence the interpretation of bilateral tax
treaties”,81 with courts in many countries considering them helpful (albeit not legally
binding) in construing DTAs modelled on the OECD MTC,82 nevertheless, unless the
context requires otherwise, an undefined term in a treaty shall have the meaning it has
under the domestic law of the Contracting State.
Context is determined by the intention of the Contracting States when signing the treaty as
well as the domestic law meaning given to the term in question.83 Yet, based on Macklin,
it is unlikely the context in which the term ‘established in’ appears in a relevant treaty can
be discerned by reference to extrinsic material, particularly where the material is produced
by one party to the relevant treaty and not explicitly and publicly agreed to by the other
party.84 It follows the definition Newey J attributed to the term ‘established in’ will apply to
any future treaty disputes involving the taxation of pensions received by UK residents, thus
complicating and prolonging future disputes involving treaty provisions that are expected
to be updated to include a reference to the term ‘recognised pension fund’.
If anything, Newey J’s decision in Macklin makes resolution of future disputes unpredictable
in circumstances where the latest Commentary acknowledges that the effect of the
definition of ‘recognised pension fund’ in Article 3(1)(i) and the reference to that term in
Article 4(1) “will depend to a large extent on the domestic law”.85
79. Azzi (2018), pp 583-584.

80. Statement of OECD Secretary-General, Angel Gurria, reproduced in OECD (2017) Multilateral Convention to
Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting: Information Brochure.
81. M. Waters, “The relevance of the OECD Commentaries in the interpretation of Tax Treaties” in Lang/Jirousek
(eds), Praxis des Internationalen Steuerrechts, liber amicorum Helmut Loukota (Linde, 2005) 671, p 674.
(Waters) In Sun Life Assurance Co of Canada v Pearson [1984] STC 461, Vinelott J said (at 511) “the
Commentaries can and indeed must be referred to as a guide to the interpretation of the Treaty.”
82. Refer S. Austry, et al, “The Proposed Multilateral Instrument Amending Tax Treaties” (2016) British Tax Review
454, p 456 (footnote 5). (Austry)
83. See Commentary to art 3(2) of the OECD MTC, para. 12.
84. A similar attitude applies in Australia: See Justice Graham Hill, “The Interpretation of Double Taxation
Agreements – The Australian Experience” (2003) Bulletin for International Fiscal Documentation 320, p 324
(Hill (2003)). See also Vann (2013), p 111.
85. See Commentary to art 3(1) of the OECD MTC, para. 10.4
ATF 34_4.indb 721 11/1/20 11:06 am

In this regard, it bears recalling that the FTT considered it “strange” to conclude that the
SRP was, as a matter of English law, ‘established in’ the US for the purposes of the UK-US
DTA when it would not be considered established in the US as a matter of US law.86 The
appeal of the FTT approach lies in its broad recognition of the ‘principle of reciprocity’ upon
which the OECD MTC is based.87
Equally, how the FTT construed the Exchange of Notes evinces a more appropriate (i.e.,
less domestic) approach to treaty interpretation compared with that of Newey J. Being
publicly available, the Exchange of Notes should rightly influence interpretation of a treaty.88
As mentioned however, Newey J considered such material as providing equivocal support

for each party’s position, whereas the FTT, by contrast, said “the language and structure
of the Exchange of Notes is very persuasive in support of [the] main proposition, that the
contracting parties meant by the phrase ‘established in’ a Contracting State the concept
of being established under and in conformity with the relevant Contracting State’s tax
legislation relating to pension schemes.”89 The support drawn from the Exchange of Notes
by the FTT is clearly justified and meets the requirement arising under Article 31(1) of
the Vienna Convention that a treaty is to be interpreted in accordance with the ordinary
meaning given to its terms “in their context and in light of its objects and purpose”.
On the other hand, the US Senate Foreign Relations report, unlike the Exchange of Notes,
is a unilateral statement of position. This perhaps helps explain why Newey J refused to
take it into account. However, the FTT was likewise well aware of the test for admissibility
expressed by Lord Wilberforce in Fothergill (supra). Nevertheless, the FTT found the expert
opinion (that was based in part on the 2003 Senate Foreign Relations report) persuasive.
Referring to the Court of Appeal decision in Ben Nevis in which Lloyd-Jones LJ cautioned
that it is for the court, and not experts, to express an opinion on the true construction of
the treaty, the FTT explained:
[W]e are not engaged in the task at the true construction of any document in
accordance with US law. The expert evidence is before us in order to assist us in
reaching a view (a finding of fact) on the meaning, as a matter of US law, of the
expression ‘established in’ with reference to a Contracting State, where it appears in
the [UK-US] DTA. 90
In the preceding circumstances, the FTT was arguably right to consider the expert evidence,
especially as it was consistent with the language of the Exchange of Notes. At the very
least, it was open and not unreasonable for the FTT to have regard to this evidence, albeit
for the limited purpose of corroborating the intention of the contracting parties. In which
case, it is difficult to accept, as Newey J found, that the FTT erred in law in so doing. Surely,
the task of fact-finding is centrally reposed in the Tribunal and appellate courts should be
reluctant to interfere unless there has been a clear error in law committed.

87. Commentary to art 3(2) of the OECD MTC, para 12
88. Cf P. Harris and D. Oliver, International Commercial Tax (Cambridge University Press, 2010), p 37. (Harris
and Oliver)
90. Ibid, at [73].
ATF 34_4.indb 722 11/1/20 11:06 am

Overall, the FTT approach to treaty interpretation in Macklin better reflects treaty
interpretation rules, which “are broader than the rules for domestic law because, while
the treaty provisions have been incorporated into domestic law, so as to take effect, what
is being interpreted is a treaty and not domestic law.”91 In the words of Mummery J in
Commerzbank, when expounding the UK approach in this regard:
The process of interpretation should take account of the fact that – ‘The language
of an international convention has not been chosen by an English parliamentary
draftsman. It is neither couched in the conventional English legislative idiom nor
designed to be construed exclusively by English judges…’ ‘[A convention] should be
interpreted … on broad principles of general acceptance.92
More recently, the UK Supreme Court has gone so far to suggest that, in some circumstances,
attainment of the object of a Convention may require “a degree of pragmatism”93 to be
applied in construing the language of a domestically-incorporated Convention for which
there is no precise equivalent in the domestic law. According to Logan J (dissenting) in
Burton, this is consistent with the House of Lords decision in Duckering v Gollan, in which
Lord Donovan (delivering judgment for the Court) said that courts can do no more than look
at the language used in a Convention and give it “a fair and reasonable construction.”94
Having highlighted the heightened concern about uncertainty in the taxation of pensions
caused by the Upper Tribunal decision in Macklin despite the 2017 updates, the following
examines the High Court decision in Macoun and finds it heightens concerns about
uncertainty from the domestic approach applied to interpret legislation giving effect to the
Convention, including the application of related court decisions in other jurisdictions. As
will appear, reflecting the “modern approach” to construction propounded in QAAH96 and
NBGM97, the High Court gave more detailed consideration to the meaning and effect of
the domestic provisions than to the meaning and effect of the Convention (from which the
domestic provisions were transposed).98
91. Harris and Oliver, p 30.

92. Commerzbank, p 302. (Citations omitted)
93. Anson v Revenue and Customs Commissioners [2015] UKSC 44, per Lord Reed SCJ at [114] (with whom
Lord Neuberger P and Lords Clarke, Sumption and Cranworth SCJJ agreed). (Anson)
94. See Burton, at [64], citing Duckering v Gollan [1965] 1 WLR 680, 691. (Duckering)
95. J. Azzi, Domestic legislation and Australia’s international obligations (2015) LQR 524, p 526. (Azzi (2015))
96. Minister for Immigration and Multicultural Affairs v QAAH [2006] HCA 53. (QAAH)
97. NBGM v Minister for Immigration and Multicultural Affairs [2006] HCA 54. (NBGM)
98. A similar approach was recently employed to delimit the expression “gain” in Article 22(2) of the Australia-
US DTA (“Relief from Double Taxation”) by the foreign income tax offset rules in s 770-10 of the Income Tax
Assessment Act 1997 (ITAA97): see Burton, per Logan J (dissenting) at [46], Steward J at [119] (with whom
Jackson J agreed).
ATF 34_4.indb 723 11/1/20 11:06 am

3. General Interpretation Principles and Macoun

The issue in Macoun99 was simple – did s 6-20(1) of the Income Tax Assessment Act
1997 (Cth) (ITAA97) apply to exempt the taxpayer from Australian income tax on retirement
benefits received from SRP after he retired from the IBRD in 2007 and returned to Australia
where he was considered an Australian resident? It was a condition of Mr Macoun’s
employment with the IBRD that he make regular contributions to the SRP, which were
deducted directly from his salary.
Under s 6-20 ITAA97, the pension would not constitute assessable income and thus not
be taxable in Australia if it was deemed exempt under the International Organisations
(Privileges and Immunities) Act 1963 (Cth) (the “Act”), which incorporated the Convention
into Australian domestic law.
The Convention came into force on 2 December 1948 and has been ratified by at least 129
countries. It “picks up”100 the privileges and immunities in the Convention on the Privileges
and Immunities of the United Nations (“the UN Convention”) which are designed to protect
the UN, and the persons working for it, from the possibility of national governments
interfering with performance of its functions on behalf of the international community. One
of the most important privileges picked up is the privilege of exemption from domestic
taxation on ‘salaries and emoluments’ received by ‘officials’ working for international
organizations such as the World Bank Group.101
The Act, in turn, gives effect to the object and purpose of the Convention by according
the same privileges and immunities of specialized agencies (including the IBRD) and the
persons working for it.102 It does this by transposing the text of the Convention. Relevantly,
Item 2 of Part I of the Fourth Schedule of the Act grants the privilege of exemption from
domestic taxation on “salaries and emoluments” received from the IBRD.
The main issue preoccupying the Administrative Appeals Tribunal (the AAT) at first instance,
the Full Federal Court and the High Court on appeal was whether the retirement benefits
received by Mr Macoun from SRP constituted ‘emoluments’ for the purposes of the Act
and were thus exempt from Australian taxation.
The AAT decision at first instance
Construing the Act by reference to the Convention, the AAT was satisfied that it did not
require a person to presently hold office to claim an exemption from Australian taxation
under Part I of the Fourth Schedule.
I do not accept the submission because the language does not draw any such
distinction or impose any requirement, or make any provision, that the person
continue to hold office in order to attract the exemption from taxation.
99. Macoun v FCT [2015] HCA 44. (Macoun)

100. Macoun, per French CJ, Bell, Gageler, Nettle and Gordon JJ at [76].
101. See Article VI, s 19(b) of the Convention on the Privileges and Immunities of Secialized Agencies.
102. See Azzi (2015), p 528
ATF 34_4.indb 724 11/1/20 11:06 am

Parts I and II of the Fourth Schedule are distinct provisions and in my view should be
read according to their own specific provisions and language.103
Noting that the expression ‘emoluments’ is undefined in either the Act or the Convention,
the AAT turned to the definition of the equivalent term under domestic law. In so doing, the
AAT held that “the pension payments are in the nature of an ‘emolument’ because they can
be described as a profit or gain arising from an office or employment or as ‘compensation
for services’ by way of remuneration.”104 In support, the AAT relied on the House of Lords
decision in Brumby v Milner.105 In that case the House of Lords held that dividend and share
distributions made under a share incentive scheme designed to encourage employees and
former employees were emoluments arising from employment.106
The AAT then considered the High Court decision in Nette v Howarth,107 which held
that, in the particular circumstances, a lump sum superannuation payment received by
the bankrupt taxpayer from the State Provident Fund (the “Fund”) upon resignation of
his employment was not an “emolument” flowing from either the taxpayer’s office108 or
labour109 but was rather due to s 38 of the Superannuation Act 1916 (NSW). This provision
authorised the lump sum payment in recognition of contributions previously deducted from
the taxpayer’s salary whilst a member of the Fund.110
Distinguishing Nette, the Tribunal member remarked that Mr Macoun became entitled to
the pension payments because of his employment with the IBRD rather than because of
his membership of the SRP.
The Applicant’s entitlement to the pension payments … were impressed with the
character of payments arising from employment. They were a part of the remuneration
entitlement which crystallised during the course of the Applicant’s employment. This
entitlement did not cease on termination of his employment.111
Qualified support for extending the meaning of the word “emoluments” to cover pension
payments was also drawn from a Board of Review decision in Case M90112, concerning
the now repealed exemption under s 23(y) of the Income Tax Assessment Act 1936 (Cth)
(“ITAA36”).113 In that case the taxpayer invoked s 23(y) ITAA36 to claim an exemption in
103. Macoun and Commissioner of Taxation [2014] AATA 155, per B Tamberlin, QC, Deputy President, at [42].
(Macoun AAT)
104. Ibid, at [32] (emphasis in original).
105. Brumby v Milner [1976] UKHL 7; [1976] 1 WLR 1096. (Brumby)
106. Ibid, per Lord Wilberforce at 1099 (Lord Diplock agreeing); Lord Simon of Glaisdale at 1100; Lord Kilbrandon
at 1101 (Lord Edmund-Davies concurring).
107. Nette v Howarth [1935] HCA 22; (1935) 53 CLR 55. (Nette)
108. Ibid, per Rich J at 60, Dixon J at 65.
109. Ibid, per Starke J at 62.
110. Ibid, per Dixon J at 63.
111. Macoun AAT, at [34].
112. Case M90, 24 CTBR(NS) 585. (Case M90)
113. Former s 23(y) ITAA36, relevantly, exempted from Australian income tax “the official salary and emoluments
of an official of a prescribed organization”. This provision was omitted by Act No. 78 of 1988 (Cth) as it was
deemed “redundant … following upon Australia’s accession to the Convention”: Taxation Laws Amendment
Bill (No. 2) 1988 – Explanatory Memorandum (the “EM”), p 3.
ATF 34_4.indb 725 11/1/20 11:06 am

respect to pension payments received from the United Nations Joint Staff Pension Fund
(“UN Pension Fund”). Dismissing the taxpayer’s claim in circumstances where it was found
that “an emolument relates to a monetary benefit payable to one who is presently serving
the United Nations”,114 the Board nevertheless conceded “the word ‘emolument’ in some
contexts may comprehend a pension payable after employment has ceased”.115
The Tribunal then referred to a decision of the Superior Court of Justice of Catalonia
(decision number 326/2007, 28 March 2007), in which three judges followed decisions of
the Supreme Court of Madrid and the Superior Court of Justice of Andalucia to conclude
pensions paid after cessation of employment as a United Nations official constituted
“emoluments” and were exempt from domestic taxation pursuant to Article V, s 18(b) of
the UN Convention on which the privilege of tax exemption in Article VI, s 19(b) of the
Convention is modeled. It was held that such payments could not be dissociated from the
reality of the taxpayer having previously been an active official of the UN.116
In view of the preceding, the Tribunal was satisfied that exemption of the pension from
Australian taxation upheld the intention of the Act to “enable the [international] organisation
… to perform its functions with the necessary immunities and privileges, so as to attract
personnel with exceptional experience and qualifications to best serve [it].”117
The Full Federal Court decision
The Commissioner appealed to the Full Federal Court, which upheld the appeal from the
AAT. Edmonds and Nicholas JJ found that the pension payment was not exempt from
Australian taxation because it was received at a time when the taxpayer was not an
office holder in the IBRD. This, they said, is a requirement for conferral of the privilege of
exemption from taxation under the Act. Notably, Perram J (who delivered a separate but
concurring judgment) observed that “the Convention properly construed requires Australia
not to impose income tax on Mr Macoun’s pension.”118
The conferral scheme is found in reg. 8(1) of the Specialized Agencies (Privileges and
Immunities) Regulations (Cth) (the Regulations), which relevantly, states:
(1) … a person who holds an office in a Specialized Agency … has the privileges
and immunities specified in Part I of the Fourth Schedule to the Act.
(2) …
(3) A person who has ceased to hold office in a Specialized Agency … has the
immunities specified in Part II of the Fourth Schedule to the Act.
Under Part II of the Fourth Schedule, a “former officer” merely enjoys “[I]mmunity from
suit and from other legal process in respect of acts and things done in his capacity as
such an officer.” Whereas under Pt I of the Fourth Schedule to the Act, , an “officer” of an
114. Case M90, at [17] per Members Fairleigh QC and Harrowell at [17], (Chairman Stevens concurring).
115. Ibid.
116. See Serafin and Yolanda (unreported appeal number 478/2001, January 17, 2003). (Serafin and Yolanda)
118. FCT v Macoun [2014] FCAFC 162, at [49] and [58]. (Macoun FCAFC) Perram J’s unexplained observation in
this regard was an important consideration in granting the taxpayer Special Leave to appeal to the High Court:
Macoun v FCT [2015] HCATrans 112.
ATF 34_4.indb 726 11/1/20 11:06 am

international organization enjoys an “[e]xemption from taxation on salaries and emoluments

received from the organisation.” Whether a person is an office holder is a question of fact,
considered on a case by case basis.119 Suffice to note, that to be considered an ‘office
holder’ for the purposes of the Act, the person must be currently engaged by the relevant
international organisation.120
The High Court decision
The taxpayer appealed to the High Court, which unanimously dismissed the appeal.
According to their Honours, the ‘privilege’ of exemption from taxation in item 2 of Pt I of
the Fourth Schedule to the Act that applies to “salaries and emoluments received from the
organisation” does not cover pension payments received by Mr Macoun from SRP. This is
because at the time of receipt the taxpayer ceased to hold office in the IBRD and, in any
case, the payments were not received from the IBRD but rather from the SRP. In the words
of the High Court:
The fact that Mr Macoun cannot satisfy these two conditions to enable him to
avail himself of the privilege of taxation exemption in Pt I of the Fourth Schedule
is a complete answer to the view expressed by the AAT that the monthly pension
payments were an emolument ‘arising from an office or employment’ or which
‘crystallised during the course of ... employment’.121
The High Court further remarked that its construction “is consistent with the purpose or
purposes of the [Act].”122 As their Honours explained, providing a currently serving officer
of a specialized agency with the privilege of exemption from taxation ensures
the international organisation secures the services of an officer who remains

independent by reason of not having to submit to the taxation jurisdiction of a
Convention State… Of course, when the officer ceases to hold the office, the interest
of the international organisation disappears.123
Relying on the majority decision in QAAH, the High Court said that it “should seek to
construe the [Act] in a manner that is consistent with Australia’s international obligations
if such a construction is open.”124 However, as with the Full Federal Court decision,
their Honours opined that a more beneficial and purposive construction of the expression
‘emolument’ was “not open” given the conferral scheme under the Act.
It is apparent that ‘emolument’, appearing as it does in the phrase ‘salaries and

emoluments’, is intended to capture a broader range of additional benefits than
‘salaries’. However, in the context of Item 2 of Pt I of the Fourth Schedule to the [Act]
and the … Regulations, that phrase is subject to the two conditions referred to earlier
119. See TR 2019/D1, at [25], relying on the High Court decision in FCT v Jayasinghe [2017] HCA 26. (Jayasinghe)
120. TR 2019/D1, relying on Jayasinghe, at [38].
121. Macoun, at [52]. (Citations omitted)
122. Ibid, at [54].
123. Ibid.
124. Ibid, at [67]. (Emphasis added and footnote omitted)
ATF 34_4.indb 727 11/1/20 11:06 am

– the emolument must be received whilst the person is an officer of a specialized

agency and the emolument must be received from the specialized agency.125
As gleaned, the modern approach preferred by the High Court requires primacy be given to
“the words used in Australian legislation and the Australian rules of statutory interpretation
in construing legislation which gives effect to international obligations, including treaties.”126
However, this approach totally upends the conventional approach to interpretation
whereby domestic legislation transposing treaty provisions is construed by reference to
the object and purpose of the international instrument (in this case the Convention) rather
than the other way round.127 It also contradicts previous High Court authority confirming
that domestic law incorporating international treaties should be interpreted in accordance
with international law interpretation rules rather than domestic interpretation rules.128
Bearing in mind the Act imports the privilege of the taxation exemption for ‘emoluments’
in the Convention, which merely requires payment to an “official” “by the specialized
agencies”,129 the focus in Macoun on the conferral scheme in the Act and the insistence
on the IBRD itself making the regular pension payments reflects a strictly literal approach
that is hostile to the object and purpose of the Convention.130 Such an approach not only
reflects “Australian parochialism”131 but, according to Kirby J (who dissented in both
QAAH and NBGM), is both “hostile to the provisions of international law”132 and “harmful
to the consistent development of international law.”133
Although not strictly necessary (given the conclusion that the payments received by Mr
Macoun from SRP were not emoluments for the purposes of the Act), the High Court in
Macoun went on to consider whether, properly construed, the Vienna Convention required
Australia not to tax Mr Macoun’s monthly pension payments. To this end, the Court
examined extrinsic material in the form of travaux preparatoires and decisions of other
courts representing State practice,134 which the High Court said were “consistent”135 with
its construction of the expression ‘emoluments’, albeit the High Court also acknowledged
that “State practice is not consistent.136”
125. Ibid, at [65].

126. Russell v FCT [2011] FCAFC 10, per Dowsett J at [26] (Edmonds J at [80] and Gordon J at [84] agreeing).
127. Refer Azzi (2015), p 525; relying on Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR
225, per Brennan CJ at 231. See also note 171 below.
128. See, eg, Thiel, per Mason CJ, Brennan and Gaudron JJ at 356.
129. See Article VI s 18(b) of the Convention.
130. The High Court’s strictly literalist interpretation of the Act in Macoun is, unsurprisingly, mirrored in TR 2019/D:
see particularly paras [36] and [39].
131. Cf D. McDonald-Norman, SZTAL: International Law and Australian Parochialism: https://auspublaw.
org/2017/10/sztal-international-law-and-australian-parochialism/. Accessed 21 August 2019
132. NBGM, at [18].
133. QAAH, at [17].
134. Decisions of foreign courts on a related subject matter are a recognized source of international law: J.
Crawford, Brownlie’s Principles of Public International Law, 8th edn (2012), p 41. Such decisions may be
admissible in interpreting a treaty that has “identical or similar language” with that considered by the foreign
court: FCT v Lamesa Holding BV (1997) 36 ATR 589, per Burchett, Hill and Emmett JJ at 594. (Lamesa)
135. Macoun, at [75].
136. Ibid, at [80].
ATF 34_4.indb 728 11/1/20 11:06 am

As the following demonstrates, however, the preparatory works and foreign decisions
the High Court considered supportive of or consistent with its decision in Macoun are,
respectfully, not relevant or, at best, provide equivocal support. If anything, the High Court’s
consideration of the extrinsic evidence confirms the “domestic legal and interpretation
culture”137 that Australian judges find difficult to escape from even when purporting to
apply international law.
Preparatory works and relevant State practice
As gleaned,138 Article 31 of the Vienna Convention requires the ordinary meaning of words
in international treaties “not to be determined in a vacuum removed from the context of
the treaty or its object or purpose.”139 Indeed, examination of context is a “mandatory
requirement”140 for interpreting treaties and “is bound to overlap with considerations
appertaining to the object and purpose of a treaty.”141
Article 32 of the Vienna Convention, in turn, permits recourse to supplementary material,

including preparatory works, “to confirm the meaning resulting from the application of
article 31, or to determine the meaning when the interpretation according to article 31:
(a) Leaves the meaning ambiguous or obscure, or
(b) Leads to a result which is manifestly absurd or unreasonable.”
It follows reference to supplementary materials should only occur once the ordinary meaning
of text has been ascertained by reference to context, including object and purpose. So
that if there is a contradiction between extrinsic materials and the clear meaning, then
“presumably the clear meaning governs.”142 On the other hand, if the meaning is unclear
then extrinsic materials may be used to determine the meaning if “they are very clear”.143
Bearing in mind the preceding, the Court examined two reports (one released in 1946
(the 1946 report144) and the other in 1947145 (the 1947 report)) presented by the Sixth
Committee to the General Assembly on the work of the Sub-Committee on Privileges and
Immunities. These confirm that from inception it was recognised that there is a need to “lay
down the basis, ways and methods”146 of granting the privileges and immunities codified
in the Convention and the UN Convention.
137. Vann (2013), p 110, relying on Lamesa. (Citation omitted)

138. Refer note 55 above.
139. Applicant A, per McHugh J at 253.
140. Ibid, at 255.
141. Golder v United Kingdom (1975) 1 EHRR 524, per Zekia J at 547.
142. Vann (2013), p 93.
143. Ibid, p 94.
144. United Nations, Privileges and Immunities of the United Nations: Report of the Sixth Committee to the General
Assembly, UN Docs A/43/Rev.1, A/43/Rev.1/Corr.1, A/43/Rev.1/Corr.2 and A/43/Corr.1 (1946). (the “1946
Report”)
145. United Nations General Assembly, Sixth Committee, Co-ordination of the Privileges and Immunities of the
United Nations and of the Specialized Agencies: Final Report of Sub-Committee 1 of the Sixth Committee, UN
Doc A/C.6/191 (1947). (the “1947 Report”)
146. J. L. Kunz, “Privileges and Immunities of International Organizations” (1947) 41 American Journal of
International Law 828, p 842.
ATF 34_4.indb 729 11/1/20 11:06 am

In its 1946 report to the General Assembly, for example, the Sixth Committee foreshadowed
the possibility of future consideration of whether the privilege of exemption from taxation
in Article V, s 18(b) of the UN Convention (which is reproduced in Article VI, s 19(b) of
the Convention) includes retirement benefits. Specifically, the Sixth Committee recorded
that its Sub-Committee decided against including in the UN Convention a proposal by
the Advisory Group of Experts on administrative and budgetary matters to exempt all UN
staff from taxation on retirement benefits. However, the Sub-Committee stated that their
decision was made “without prejudice to th[e] question being taken up and considered
separately at a later stage”.147
This is further reinforced when considering the 1947 report, which the High Court observed
showed “there was still debate about the final form and effect of the provision in the UN
Convention”.148 To this end, the 1947 report records “that the final and definitive conclusion
with regard to this matter [viz., scope of expression ‘salaries and emoluments’ in s 19(b)]
may not be reached before the General Assembly of 1948.”149 As matters turned out, there
is still no definitive resolution of this issue.
That the issue concerning whether or not ‘emoluments’ includes retirement benefits was
a matter of continuing debate is telling and should have led the Court in Macoun to be
more circumspect when relying on the 1946 and 1947 reports in support of its narrow
construction of the term. If anything, it shows that both reports do not provide conclusive
evidence about how the expression ‘emoluments’ in the Convention should be interpreted.
In these circumstances, it is hard to accept that the preparatory works support the narrow
construction of the expression ‘emoluments’ preferred by the High Court. Indeed, because
the Convention is the result of various compromises by various States or groups of
States,150 it is unsurprising there continues to be debate around this issue. It follows neither
the 1946 report nor the 1947 report provide ‘very clear’ evidence about whether or not the
expression ‘emoluments’ embraces retirement benefits.
To the contrary, the reports provide clear evidence that the issue of taxation of pension
payments continues to be a live issue. Given the divergent national tax systems and
approaches adopted by the various Specialised Agencies, the task of identifying whether
retirement benefits are contemplated in the expression ‘emoluments’ in the Convention is,
unsurprisingly, said to be ‘tormenting’.
The fact that divergent systems of taxation prevail in different countries makes it quite
a tormenting task to identify what benefits can exactly be considered to fall under
the privilege of tax exemption. To start with, Specialized Agencies themselves do not
have a common understanding of what the term ‘salaries and emoluments’ means.151
147. The 1946 Report, pp 643-644.

148. Macoun, at [78].
149. The 1947 report, p 9
150. The procedural history to the Convention and the UN Convention is outlined by Professor August Reinisch:
http://legal.un.org/avl/ha/cpiun-cpisa/cpiun-cpisa.html. Accessed 25 March 2019.
151. A.S. Barros & C Ryngaert C., Article VI Specialized Agencies Convention, at [55]. Available at: http://unijuris.
sites.uu.nl/wp-content/uploads/sites/9/2014/12/Article-VI-Specialized-Agencies-Convention.pdf. Accessed
25 August 2019.
ATF 34_4.indb 730 11/1/20 11:06 am

Likewise, many of the cases the High Court said represent State practice of parties to
the Convention and that support its preferred strictly literalist construction of the term
‘emoluments’ involve either “materially different”152 facts or are otherwise rendered
irrelevant by subsequent developments. This is particularly so in relation to the Dutch and
French court cases that the High Court said support the view that period pension payments
are subject to national taxation.153
In the “Dutch case”, for example, the taxpayer, a former registrar of the International Court
of Justice, had unsuccessfully argued that the privilege of exemption from taxation applied
to retirement benefits. Importantly, however, the relevant statute did not contain the word
‘emoluments’.154 Therefore, it is curious the High Court should mention this decision in the
body of its judgment but merely refer in a footnote to other more relevant decisions going
the other way, which Perram J in the Full Federal Court agreed “directly”155 interpret the
expression ‘emoluments’ in the Convention.
The High Court also referred to decisions of a French arbitral tribunal and appeals court
concerning the taxation of pension payments received by retired officials of the United
Nations Educational, Scientific and Cultural Organization (“UNESCO”). In both cases
however, participation in the Retirement Fund was not mandatory unlike the situation in
Macoun.156 Be that as it may, the French decisions were not immune from criticism with
the French government, subsequently, concluding an agreement that contains an express
tax exemption for retired officials of specialized agencies.157
The High Court in Macoun then turned to consider the 1979 decision of the UN
Administrative Tribunal (“the UNAT”) in Powell v Secretary-General of the United Nations,158
which their Honours said is “significant” because it illustrates the position adopted by the
United Nations and that “nearly all States which are parties to the UN Convention tax
period pensions payment.”159 The relevance of this decision is, respectfully, questionable
particularly considering it was made over 40 years ago with the reimbursement system the
subject of the appeal now abolished.
The reimbursement system in Powell was introduced to address a particular inequality

caused by the domestic taxation of US nationals working for international organisations,
which was generally not the case for non-US nationals.
152. Refer Appellant’s Reply [27](e). Available at: http://www.hcourt.gov.au/assets/cases/s100-2015/Macoun_

Reply.pdf. Accessed 25 August 2019.
153. See Macoun, at [81].
154. See X v State Secretary for Finance, Supreme Court of the Netherlands (16 January 2009), in (2010) 41
Netherlands Yearbook of International Law 394.
155. Macoun FCAFC, at [54].
156. See Decision 01PA04215 of the Paris Administrative Court of Appeal (7 November 2003) and Arbitration
Tribunal constituted by the Government of the French Republic and UNESCO to consider the question of the
tax regime governing pensions paid to retired UNESCO officials residing in France, United Nations Juridical
Yearbook, (2001), p 421.
157. See G. B. Burdeau, “France” in A. Reinsich (ed), The Privileges and Immunities of International Organizations
in Domestic Courts (OUP, 2013), p 121.
158. Powell v Secretary-General of the United Nations, Judgment No 237 of the Administrative Tribunal of the
United Nations (13 February 1979). (Powell)
159. Macoun, at [80]. (Footnote omitted)
ATF 34_4.indb 731 11/1/20 11:06 am

It was used by the United Nations as a device to avoid placing taxable staff members
(primarily, US nationals160) at a disadvantage in comparison with tax-exempt staff with
whom they serve,161 which was also creating inequity amongst Member States.162
Mr Powell (a US national that had retired from the United Nations Secretariat on 30 June
1978) was claiming tax reimbursement from the United Nations Staff Pension Fund on
one-third lump sum pension payments he elected to receive. The UNAT considered
representations from the United States (as Amicus) to the Secretary-General of the United
Nations, who agreed that no reimbursement should be provided because (i) there was
no legal basis to do so, and (ii) the partial lump-sum did not constitute “salaries and
emoluments” for purposes of the UN Convention.163
Mr Powell argued that it was unfair to deny reimbursement when he had not been given prior
notice of a change in practice, which had been in effect prior to 1978.164 Mr Powell further
asserted discrimination “on the grounds of … nationality since non-U.S. staff members
do not have to pay income tax on their one-third lump sum pension withdrawals.”165
under Regulation 3.3(f) of the Pension Fund Regulations these withdrawals qualified for
reimbursement as “salaries and emoluments”.
UNAT found that the one-third lump sum payment could be “regarded as a terminal
payment which under Staff Regulation 3.3(f) is eligible for reimbursement.”166 The Tribunal
Members were fortified in their conclusion by documents confirming that the United Nations
Administration “has always considered full lump sum withdrawals from the Pension Fund
as emoluments.”167
Given these peculiar and historical facts, it is surprising the High Court in Macoun devotes
four (out of a total of 83) footnotes to Powell’s case. According to their Honours in Macoun:
This decision is significant for a number of reasons. First, it records that it was not
in dispute that not all States which are parties to the UN Convention tax periodic
pensions payments. Second, after citing the passage from the preparatory works for
the UN Convention referred to above, the decision records the Secretary-General of
the UN’s argument that the preparatory works ‘clearly exclude pension paid to former
staff members from section 18(b) of the [UN] Convention’. Third, the decision records
that it was admitted by the parties that periodic pension payments are subject to
national taxation.168
160. Unlike nationals of other countries working for specialized agencies, the US reserves the right to tax its
nationals despite having ratified the Convention.
161. Powell, at 66 [XI].
162. In a report to the ninth session of the General Assembly (reproduced in Powell, at 65 [XI]), the UN Secretary-
General explained: …a Member State which has granted exemption or relief from double taxation to its
nationals who are staff members shoulders an additional burden in contributing to the budget appropriation
for reimbursement of national income tax levied by other Member States.
163. Powell, at 58-59.
164. Refer Information Circular ST/ADM/SER.AD/1828 of 16 December 1974.
165. Powell, at 59.
166. Ibid, at 73 [XXII].
167. Ibid, at 72 [XXI].
168. Macoun, at [80]. (Footnotes omitted)
ATF 34_4.indb 732 11/1/20 11:06 am

Surely, that the unique reimbursement scheme considered in Powell no longer exists and
that, in any case, there was evidence at the time that some countries considered pensions
emoluments for the purposes of the privilege from taxation in the Convention are highly
relevant factors weighing against the significance of the decision in Powell as evidence
of State practice. In this regard, it is telling that the Secretary-General’s agreement (as
amicus) with the US submissions may have been driven by political expediency given the
unresolved and ongoing debate concerning the exemption of pensions in the 1946 and
1947 reports (supra). After all, the High Court in Macoun itself conceded “there is still no
generally accepted State practice with regard to the exemption of retirement pensions from
taxation.”169
Given the preceding, it is hard to accept that Powell provides support for the narrow and
strictly literalist interpretation of the expression ‘emoluments’ preferred by the High Court in
Macoun. To the contrary, evidence that the UN Administration has always treated pension
withdrawals as exempt emoluments provides stronger context in terms of Article 31(1)(3)
of the Vienna Convention170 to support a broad and liberal construction of the expression
‘emoluments’ in the Convention.
It follows that by relying on inconclusive preparatory works and irrelevant decisions of

foreign courts, the decision in Macoun sets a dangerous and unsound precedent that
inappropriately excludes ‘emoluments’ from the privilege of exemption from taxation in the
Convention. This is particularly concerning given the high regard with which High Court
decisions are held internationally and the unconventional approach employed to narrowly
construe the Act.
How Macoun undermines general interpretation principles
Historically, Australian courts construed domestic legislation transposing provisions from a

treaty in their context and in the light of the object and purpose of the treaty, including the
‘mischief’ the treaty is designed to address.
If a statute transposes the text of a treaty or a provision of a treaty into the statute so
as to enact it as part of domestic law, the prima facie legislative intention is that
the transposed text should bear the same meaning in the domestic statute as it
bears in the treaty. To give it that meaning, the rules applicable to the interpretation
of treaties must be applied to the transposed text and the rules generally applicable
to the interpretation of domestic statues give way
In interpreting a treaty, it is erroneous to adopt a rigid priority in the application

of interpretive rules… Rather … it is necessary to adopt a holistic but ordered
approach… [that] may require a consideration of both the text and the object and
purpose of the treaty in order to ascertain its true meaning. Although the text of a
treaty may itself assist in ascertaining its object and purpose, assistance may also
be obtained from extrinsic sources … [including] the mischief that it addresses….”171
169. Ibid, at [82].

170. Article 31(3) of the Vienna Convention states: There shall be taken into account, together with the context:
(a) … (b) Any subsequent practice in the application of the treaty which establishes the agreement of the
parties regarding its interpretation; (c) Any relevant rules of international law applicable in the relations between
the parties.
171. Applicant A, per Brennan CJ at 230-231 (relevantly agreeing with McHugh J). (Emphasis added)
ATF 34_4.indb 733 11/1/20 11:06 am

However, rather than discerning the mischief the Convention was designed to address
by use of the expression ‘emoluments’, the High Court in Macoun instead considered the
conferral scheme under the Act more important in discerning object and purpose than the
text of the Convention, which, as mentioned, contained no such scheme. In so doing, the
High Court appears to ignore the importance of the Schedules to the Act, which constitute
part of the Act172 and significantly inform the context, general purpose and policy of the
Act.
A key purpose of the Schedules discerned from the Second Reading Speech of Sir Garfield
Barwick QC, who was Attorney-General at the time, is to “describe the privileges and
immunities which may be conferred by the regulations, as well as the class of persons
upon whom the privileges and immunities may be conferred.”173 In this regard, Barwick
earlier remarked that when read in conjunction with the schedules:
[s] 6 … proposes that Parliament should lay down very clearly the upper limits …
of the privileges and immunities which might be conferred by the regulations upon
international organizations and person connected those organizations….174
Notwithstanding, their Honours in Macoun were satisfied that the purpose of the Act “is not
for the benefit of, or personal to, the person connected with those international organisations
but is rather to assist the organisations in the ‘performance of [their] functions”.”175 Yet,
relying on somewhat similar extrinsic material as the High Court, the Tribunal member (a
retired Federal Court judge) arrived at a completely opposite conclusion.
In the present case, the ordinary meaning contended for by the Applicant is consistent
with the language used, having regard to the context, object and purpose of the
[Act] in attempting to attract personnel [to the IBRD]. In my view the conclusion is
also supported by what was referred to by Sir Garfield as the necessary privileges
and immunities available to enable the organisation or member to perform its
functions with the necessary immunities and privilege, so as to attract personnel with
exceptional experience and qualifications to best serve the organisation.176
As gleaned from the Second Reading Speech, the Act was introduced to provide a
framework to enable conferral of “recognized benefits” to counter for the potential mischief
of national governments interfering with the important work of specialized agencies,
which can only be achieved if the relevant agency “and the persons working for it … are
accorded certain privileges and immunities…”177 What this infers may readily be gleaned
from a decision of the Disputes Chamber of the Supreme Court of Andalusia in Serafin and
Yolanda (unreported, appeal number 478/2001) (17 January 2003) explaining why pension
payments received by a retired UN official should continue to enjoy the immunities granted
by Article V Section 18(b) of the UN Convention.
172. Section 13(2) Acts Interpretation Act 1901 (Cth).

173. Second Reading Speech for the International Organizations (Privileges and Immunities) Bill 1962, Australia,
House of Representatives, Parliamentary Debates (Hansard), 8 May 1963, p 1163. (SRS)
174. bid, p 1161.
175. Macoun, at [53]. (Footnote omitted)
177. SRS, p 1164
ATF 34_4.indb 734 11/1/20 11:06 am

… it is clear that these amounts are received as a consequence of having been an

active official [of the] United Nations, which in no way can be dissociated from the
reality of belonging to that cited international organisation.178 (Emphasis added)
This decision along with a decision of the High Court of Bombay179 and a 2007 decision of
the Supreme Court of Catalonia180 were merely cited in a single footnote (footnote 83) in
Macoun for evidence of inconsistent State practice, but without any discussion or reason
why they were less persuasive than Powell and the other decisions discussed by their
Honours in Macoun. Surely, given they were handed down relatively recently and address
a similar issue to that arising in Macoun, these decisions more clearly and authoritatively
inform State practice in other countries than the outdated decisions of the UNAT and
French and Dutch courts discussed at some length in Macoun? If anything, the process of
reasoning adopted by the High Court to strictly interpret the word ‘emoluments’ from the
Convention is both flawed and contradicts the conventional approach of the High Court
had previously followed in “countless cases”.181
Toward the immediately preceding end, it was necessary for the High Court in Macoun
to identify what constituted ‘recognized benefits’ at the time the Act was introduced
and whether the Convention contemplates the dichotomy between office holders and
former office holders established in the Act. Only then could the true meaning of the
word “emoluments” imported from the Convention be discerned, particularly when this
expression is not relevantly found in Australia’s domestic tax laws. As construed by the
High Court however, the expression ‘emoluments’ has no work to do in circumstances
where its meaning and effect is governed by the conferral scheme under the Act rather
than the object and purpose of the Convention from which it is imported.182
4 Concluding Observations
Bearing in mind “great store is set upon certainty and uniformity of application”183 of
international instruments, with uniformity, or at least predictability, “regarded as one of the
essential features of the law”,184 it has been observed that the law will “suffer a loss”185
from the non-uniform and divergent interpretation of treaties enacted domestically.
178. The relevant passage from this decision was helpfully reproduced in Perram J’s reasons for decision in Macoun
FCAFC, at [54].
179. Commissioner of Income-tax v Kolhatkar (1994) 211 ITR 850.
180. Enrique, Supreme Court of Catalonia (appeal number 122/2003, 28 March 2007).
181. Cf NBGM, per Kirby J (dissenting) at [14].
182. Contra Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, per McHugh, Gummow,
Kirby and Hayne JJ at [71]. (Project Blue Sky)
183. Shipping Corporation of India Ltd v Gamlen Chemical Co (A’asia) Pty Ltd (1980) 147 CLR 142, per Mason
and Wilson JJ at 159 (Gibbs and Aickin JJ concurring).
184. Ulster-Swift Ltd v Taunton Meat Haulage Ltd [1977] 1 W.L.R. 625, per Megaw LJ at 632 (delivering judgment
for the Court of Appeal) (Ulster-Swift); cited with approval in Buchanan & Co v Babco Ltd [1978] AC 141, per
Lord Edmund Davies at 168-169.
185. Ulster-Swift, 632 per Megaw LJ at 632.
ATF 34_4.indb 735 11/1/20 11:06 am

To this end, an “important consideration” in interpreting legislation intended to implement

international agreements is to give weight to the construction which the international
community would attribute to it. Doing so “avoid[s] a multitude of divergent approaches in
the territories of the contracting parties on the same subject matter”.186
Yet, as the above showed, non-uniformity abounds as a result of the domestic approach
applied by municipal courts to interpret domestically enacted international instruments. If
anything, the above illustrated why domestic courts are considered the Achilles’ heel in
the enforcement of international obligations and how inconsistency and non-uniformity in
the development of international law occurs when domestic courts interpret and apply a
country’s international obligations.
In Macoun, for example, the High Court relied on largely irrelevant international decisions
and equivocal extrinsic material to narrowly construe the expression ‘emoluments’. In
particular, the Court accorded substantial weight to a foreign decision dealing with a
materially different matter (and ignored more relevant decisions) to support its strictly literal
and narrow interpretation of the expression ‘emoluments’ in the Act despite that it was
imported from the Convention. This was in stark contrast to the approach of the Tribunal
at first instance, which adopted a more liberal interpretation that was more consistent with
related decisions in other jurisdictions and the object and purpose of the Convention.
The High Court’s decision in Macoun undermines the true object and purpose of the
Convention. To reiterate, the Convention seeks to prevent member countries from using
their tax systems to interfere with the work specialised agencies do on behalf of the
international community. In so doing, it also ensures these organisations can attract the
most qualified staff to help them fulfil their tasks without the need to pay excessively high
salaries commensurate with those being earned by highly qualified personnel working in
the private international sector. In this regard, exemption from domestic country taxation
for the entire salary package (viz., salary and retirement benefits) effectively achieves this
purpose.
Confining conferral of the privilege of exemption by reference to current active service, as

the High Court in Macoun did, overlooks the irrefutable logic, accepted by the Tribunal in
Macoun and Spanish and Indian courts, that entitlement to pension payments could only
arise because of previous active service where participation in the SRP was a prerequisite
to employment with the IBRD.
It follows that the modern approach applied in Macoun “derogate[s] from Australia’s
international obligations”187 to the extent that it relies on domestic interpretation principles
to construe provisions imported from international conventions and only resorts to
customary international rules of interpretation if not otherwise inconsistent with domestic
rules. This represents a reversal of previous practice and devalues the importance and
effect of Australia’s participation and ratification of international instruments. In terms of
future disputes, the decision in Macoun also risks setting an inappropriate precedent given
the high regard with which the High Court is held internationally.
186. Rocklea Spinning Mills Pty Ltd v Anti-Dumping Authority (1995) 37 ALD 405, per Spender, Einfeld and
Tamberlin JJ at 417. (Rocklea)
187. Azzi (2015), p 526.
ATF 34_4.indb 736 11/1/20 11:06 am

Surely, by agreeing to implement a multilateral convention concluded by a host of nations

after lengthy negotiations and expressed in necessarily general and imprecise language, it
is “not appropriate”188 for international obligations under that treaty to then be construed
strictly or literally. But that is precisely what the High Court (and the Full Federal Court) did
in Macoun. It was suggested elsewhere
The current interpretative approach advocated by the High Court and applied
in Macoun reflects hostility to established rules of international law rather than
facilitation and implementation.189
The Full Federal Court of Australia applied a similar domestic interpretation approach
in FCT v Resource Capital Fund III LP190 to deny treaty benefits to a limited partnership
inconsistently with the decision at first instance and the OECD Commentary.
[D]espite extensive OECD Commentary propounding when a fiscally transparent

entity is entitled to treaty benefits, the courts in RCF could not agree on whether
[the Australia-US DTA] in fact applied, and if so, its import as regards the case under
consideration.191
The above discussion of the Macklin decision also explained why heightened concern
about tax uncertainty is expected to prevail despite OECD efforts to ensure consistency
of interpretation and application of identical provisions in tax treaties, which are “generally
phrased reciprocally, reflecting the intentions of the parties that they should be applied in
the same way and to the same extent in each State.”192 As shown, the domestic approach
applied by Newey J in the UKUT meant that extrinsic evidence expounding the US position
was ignored in favour of a non-reciprocal interpretation that held the SRP was resident in
the US because it was geographically located there albeit it was not governed by US laws.
The latter being a requisite condition under Articles 3 and 17 of the US-UK DTA and the
2017 OECD updates to Articles 3 and 4 of the OECD MTC.
It follows the Macklin decision is likely to complicate and prolong the resolution of future
disputes regarding the residency status of ‘recognised pension funds’, which is importantly
informed by the undefined term “established’ and which, in turn, necessitates reliance
on definition of the equivalent expression in internal laws. As gleaned however, in many
cases there will be no relevant definition domestically, thus resulting in litigation where the
competent authorities in each of the contracting States cannot agree on a commonly held
position. In this regard, it bears recalling that the Macklin litigation arose precisely because
of the failure of the UK and US competent authorities to resolve a simple dispute under the
MAP in Article 26 of the UK-US DTA about whether the SRP was ‘established in’ the US.
Yet as the discussion in this article amply illustrates, resolving treaty disputes regarding
the international taxation of pension payments in domestic courts is not ideal or optimal.
188. Cf Fothergill, per Lord Fraser of Tullybelton at 285.

189. Azzi (2015), p 530.
190. [2014] FCAFC 37.
191. Azzi (2018), p 586.
192. Waters, p 673
ATF 34_4.indb 737 11/1/20 11:06 am

Not only is it “costly, complex, uncertain, adversarial and time consuming”,193 it has
the potential to produce “unexpected results”194 that exacerbate uncertainty and
unpredictability. This is most evidently obvious in relation to transfer pricing disputes
(which account for the bulk of MAP cases) where domestic courts “have struggled … to
achieve consistency in judgments and thus certainty for taxpayers”,195 with the OECD
“determined”, according to Professor Graeme Cooper, “to keep the matter complex”.196
Noting that “[t]ax courts and tribunals often deliver differing opinions – even in the absence
of any clear ambiguity in the text of the law”, the editor of the Kluwer International Tax
Blog, Shilpa Goel, recently remarked that “[t]here is no doubt then that we will see the
same trend in the context of the BEPS MLI, given how vaguely some of its provisions have
been drafted.”197 What all this means is that disharmony will likely reign with “no universal
wisdom”198 to draw upon despite municipal courts’ attempts to harmonise interpretation
of domestically enacted treaties for the sake of uniformity.
Towards the preceding end, it has been suggested that the recent introduction of mandatory
binding arbitration in the MLI should provide “taxpayers certainty that double taxation will
be eliminated”,199 or at least prompt competent authorities to reach agreement for fear
of having an unreviewable arbitration decision thrust upon them. However, according
to Professor Brian Arnold, countries are likely to limit the types of issues qualifying for
arbitration given their lack of experience with mandatory arbitration and discomfort with its
operation as a mechanism for resolving disputes.200
Regardless and notwithstanding that the OECD suggests (justifiably or otherwise) it would
be “rare for taxpayers to reject a mutual agreement in order to have recourse to domestic
courts”,201 taxpayers are nevertheless expected to continue to opt for litigation given
the opt-out provision in the MLI (retained as a matter of fairness, if not also to avoid the
possible “violation of human rights”202), the low-take up rate and the strong (“if sometimes
misguided”203) opposition to arbitration by some countries.
193. M. Markham, The optimal Way to Resolve Tax Treaty Disputes: Litigation or Arbitration?, Austaxpolicy: Tax and
Transfer Policy Blog, 13 March 2019. Available at: https://www.austaxpolicy.com/optoimal-way-resolve-tax-
treaty-disputes-litigation-arbitration. Accessed 28 March 2019. (Markham (2019))
194. A. Nikolakakis, et al., “Some Reflections on the Proposed Revisions to the OECD Model and Commentaries,
and on the Multilateral Instrument, With Respect to Fiscally Transparent Entities” (2017) 3 British Tax Review
295, p 360. (Nikolakakis)
195. R. J. Vann, “Transfer pricing disputes in Australia” in E. Baistrocchi and I. Roxan, Resolving Transfer Pricing
Disputes – A Global Analysis (2012, Cambridge University Press) 359-414, p 387.
196. G. Cooper, “What did we learn from Chevron?” (2017) 46 Australian Tax Review 227-241, 240.
197. G. Shilpa (Editor), ‘“I see it differently”: Interpreting the BEPS MLI’”, Kluwer International Tax Blog, July 29
2019. Available at: http://kluwertaxblog.com/2019/07/29/i-see-it-differently-interpreting-the-beps-mli/
198. Cf Buchanan & Co v Babco Ltd [1978] AC 141, per Lord Wilberforce at 154.
199. See B. Arnold, International Tax Primer (4th edition) (Wolter Kluwer, 2019), p 217. (Arnold ITP)
200. Ibid, p 218.
201. Ibid.
202. Ibid.
203. Azzi (2018), p 587.
ATF 34_4.indb 738 11/1/20 11:06 am

[I]t is difficult either to accept that mandatory binding arbitration is, in truth, binding
or that it will in fact result in significant improvements to the MAP given prevailing
opposition and the low take-up rate. That arbitration decisions may be binding
on Contracting Jurisdictions but, ultimately, not on taxpayers is likely to further
undermine the appeal of mandatory arbitration for relatively under-resourced
jurisdictions inexperienced in resolving disputes under the MAP.204
In separate but related developments, there is “growing recognition of the value of

providing to, or at least, offering commercial parties to cross-border transactions a genuine
alternative to arbitration for resolving their disputes”205 in the form of an international
commercial court. It has been suggested that an international commercial court will
not only help overcome “mistrust by parties from all countries of the judiciaries of other
countries”206 but will also add to the range of dispute resolution options, ensuring dispute
resolution operates more effectively at an international level.207 As the Chief Justice of
Singapore, Menon CJ aptly and pithily explained:
… arbitration, by its very nature, cannot provide a complete solution to propel

the vessel of global commerce forward. Arbitration was conceived as an ad hoc,
consensual, convenient and confidential method of resolving disputes. It was not
designed to provide an authoritative and legitimate superstructure to facilitate global
commerce.208 (Emphasis in original)
Given the preceding, there is some force in the suggestion that the international community
consider establishing an international tax court to resolve cross-border tax disputes. Such
an edifice, it is said, would not only “add to the range of dispute-resolution options”209
but could potentially generate more consistency and uniformity in the interpretation of
treaties.210
204. Ibid, p 584.

205. Justice A S Bell, “An International Commercial Court – Not a bad idea or what a bad idea?”, paper delivered at
2019 Biennial International Conference 12 July 2018, Singapore, at [7]. Available at http://www.supremecourt.
justice.nsw.gov.au/Documents/Publications/Speeches/2019%20Speeches/Bell_20190712.pdf. Accessed
29 August 2019. (Bell (2019))
206. Chief Justice Tom Bathurst, “The Importance of Developing Convergent Commercial Law Systems,
Procedurally and Substantively”, speech delivered at the 15th Conference of Chief Justices of Asia and the
Pacific, Singapore, 28 October 2013), at [50].
207. Chief Justice Marilyn Warren and Croft J, “An International Commercial Court for Australia – Looking beyond
the New York Convention”, speech delivered at the Commercial CPD Seminar Series, 13 April 2016,
Melbourne, p 19.
208. Chief Justice Sundaresh Menon, “International Commercial Courts: Towards a Transnational System of
Dispute Resolution”, speech delivered at the Dubai International Financial Centre Courts Lecture Series 2015,
Dubai, 22 January 2015, at [14].
209. Azzi (2018), p 588.
210. J. Azzi, “Tackling tax treaty tensions: Time to think about an International Tax Court” (1998) 52 (8/9) Bulletin
for International Fiscal Documentation 344. (Azzi (1998))
ATF 34_4.indb 739 11/1/20 11:06 am

And unlike the investor-state dispute settlement (ISDS) clauses in many bilateral investment
treaties (BITs), which many countries are increasingly rejecting (whether for legitimate or
otherwise political reasons211), there is no issue about the different rights enjoyed by local
and foreign taxpayers.212
Currently, as revised by the MLI, Article 25 OECD MTC permits the affected taxpayer to
present its case to the relevant competent authority irrespective that it is not where the
taxpayer resides.213 And if mutual agreement cannot be reached in a timely manner (viz.,
two years), the taxpayer is permitted under Article 19(1) of the MLI to submit any unresolved
issues for mandatory arbitration. In which case, it could be a simple matter of amending
Article 19(1) by inclusion of the additional option permitting the taxpayer to submit the
unresolved dispute for litigation in the proposed international tax court.
However, discussion of the effectiveness and appeal of an ITC is beyond the scope of this
paper. Suffice to note that an article published in 1998 presciently recognised the “increased
likelihood that divergent national treaty-related rulings will cause even more uncertainty with
regard treaty obligations” due to the “complexity of international transactions conducted in
an increasingly integrated business environment”,214 and argued
that establishing an ITC with power to settle international tax disputes would not
only lead to the creation of a centralized database of precedents but would also
inject uniformity and certainty into the field of tax regulation of international … flows
of capital and income, thus substantially removing the likelihood of conflict and
opportunity loss inherent in the myriad divergent national and sub-national rulings
and interpretations of the various Articles comprising the more than 1,500 [DTAs]
currently in force around the world and which are based on successive versions of
the OECD MTC.215
If the international community is serious about reducing heightened concerns about tax
uncertainty from domestic court decisions, then it must seriously think about establishing
an ITC to circumvent, or at least limit, the role of domestic courts in resolving international
tax disputes. Given the embrace of mandatory binding arbitration by some jurisdictions,
despite long held fiscal sovereignty concerns, the prospect of establishing an ITC warrants
further consideration, and soon, in view of the ‘tsunami’ of disputes expected to arise as
more jurisdictions ratify the MLI.
211. Trakman L E, “Choosing Domestic Courts Over Investor-State Arbitration: Australia’s Repudiation of the Status
Quo” (2012) 35 University of New South Wales Law Journal 979-1012.
212. ISDS clauses in BITs give foreign companies rights otherwise unavailable to local companies and end up
inflicting huge costs on host countries, even if they win the particular dispute (as occurred in the case of
Australia’s dispute with Philip Morris about plain paper packaging for cigarettes): P. Ranald, “When even
winning is losing. The surprising cost of Philip Morris over plain packaging” The Conversation (2019).
213. See art 16(4)(a)(i) of the MLI.
214. Azzi (1998), 346.
215. Azzi (1998), 348. It is noteworthy that the International Bureau of Fiscal Documentation (IBFD) is currently
developing the Global Tax Treaty Commentaries (GTTC). Designed to provide an “authoritative source for
analysis and commentary of tax treaty practice across the globe”, and containing a separate chapter on the
important meta-topic of ‘Treaty Interpretation’, the GTTC could prove instrumental in facilitating the work of
the proposed ITC.
ATF 34_4.indb 740 11/1/20 11:06 am

Had Macklin and Macoun been litigated in the proposed ITC (jurisdictional issues aside)
instead of domestic courts, it would have been highly likely that completely different and
better-reasoned outcomes would have eventuated. In the case of Michael Macklin, the
ITC would probably have found the retirement benefits paid by SRP are not exempt under
the UK-US DTA because the SRP is not ‘established in’ the US, not being governed by
US laws albeit that it is administered in the US. And in the case of Mr Macoun, the ITC
would probably have found the pension payments exempt from Australian income taxation
in circumstances where a broad interpretation would be ascribed to the expression
‘emoluments’ in Part I of the Fourth Schedule to the Act, which is more consistent with the
purpose and object of the Convention as well as State practice in other countries.
Either way, attainment of ‘universal wisdom’ as a means to ameliorate tax uncertainty

concerns from litigation of international tax disputes in domestic courts is unlikely to be
achieved through mandatory binding arbitration alone, being both ad hoc and secretive.
If anything, the 28 countries that have already expressed their intention to take up the
arbitration option in the MLI should consider the possibility of establishing an ITC as an
additional mechanism for resolving treaty-related disputes.
ATF 34_4.indb 741 11/1/20 11:06 am

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Tax certainty and taxation of

international pension funds: The

The article then concludes by reiterating an earlier suggestion that greater

ATF 34_4.indb 707 11/1/20 11:06 am

This article was accepted for publication on 13 October 2019

ATF 34_4.indb 708 11/1/20 11:06 am

9. 2018 Update Report, p 18.

ATF 34_4.indb 709 11/1/20 11:06 am

The preceding is developed below as follows: Part 2 (Residence of Pension Funds)

ATF 34_4.indb 710 11/1/20 11:06 am

2. Residence of Pension Funds

(i) that is constituted and operated exclusively to administer or provide

ATF 34_4.indb 711 11/1/20 11:06 am

Article 3(1)(i) OECD MTC now reads:

ATF 34_4.indb 712 11/1/20 11:06 am

Article 25 institutes a mutual agreement procedure (MAP) for resolving treaty-related

31. Commentary on art 3(1) OECD MTC, [10.11].

ATF 34_4.indb 713 11/1/20 11:06 am

2.2 The Macklin decisions

37. Comments on Public Discussion Draft, p 47

ATF 34_4.indb 714 11/1/20 11:06 am

The First Tier Tribunal decision

40. Macklin FTT, at [103].

ATF 34_4.indb 715 11/1/20 11:06 am

The UK Upper Tribunal (UKUT) Decision

Referring to well-settled authority that counsels against a “strictly literal construction”51 of

46. Ibid, at [106].

ATF 34_4.indb 716 11/1/20 11:06 am

Newey J explained that Article 31 of the Vienna Convention “embodies customary

ATF 34_4.indb 717 11/1/20 11:06 am

61. Article 32 of the Vienna Convention.

ATF 34_4.indb 718 11/1/20 11:06 am

As the following demonstrates however, the Macklin decision remains relevant

ATF 34_4.indb 719 11/1/20 11:06 am

As discussed, an entity is a ‘recognised pension fund’ if it is ‘established and operated

75. Baker QC, p 285.

ATF 34_4.indb 720 11/1/20 11:06 am

domestic courts of either Contracting Jurisdiction in circumstances where dissatisfied

Although the Commentary may be regarded as the “most comprehensive source of

79. Azzi (2018), pp 583-584.

ATF 34_4.indb 721 11/1/20 11:06 am

As mentioned however, Newey J considered such material as providing equivocal support

86. Macklin FTT, at [103].

ATF 34_4.indb 722 11/1/20 11:06 am

91. Harris and Oliver, p 30.

ATF 34_4.indb 723 11/1/20 11:06 am

3. General Interpretation Principles and Macoun

The AAT decision at first instance

99. Macoun v FCT [2015] HCA 44. (Macoun)

ATF 34_4.indb 724 11/1/20 11:06 am

ATF 34_4.indb 725 11/1/20 11:06 am

The Full Federal Court decision

ATF 34_4.indb 726 11/1/20 11:06 am

international organization enjoys an “[e]xemption from taxation on salaries and emoluments

The High Court decision

the international organisation secures the services of an officer who remains

It is apparent that ‘emolument’, appearing as it does in the phrase ‘salaries and

ATF 34_4.indb 727 11/1/20 11:06 am

– the emolument must be received whilst the person is an officer of a specialized

125. Ibid, at [65].

ATF 34_4.indb 728 11/1/20 11:06 am

Preparatory works and relevant State practice

Article 32 of the Vienna Convention, in turn, permits recourse to supplementary material,