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Every state may tax their subject. However an issue is raised when there is an incidence of tax levied by two countries on the same property or person. The OECD committee on fiscal affairs stated the problem as "imposition of comparable taxes in two or more states on the taxpayer in respect of the same subject matter and for identical periods:"

Generally, a country will tax its citizens on their worldwide income and also the income and gains at source. The source principle envisages that a country will tax their citizens and also non-resident person's incomes and gains in the country. The issue of jurisdiction arising from residence and source is one of the main issues on international taxation. Many Corporations select destinations to save taxes and the International tax policy would be to control such activities.

The incidence of double taxation is of the following two types :

• Juridical Double Taxation: This occurs where two countries impose tax on the same property or person in a way that there is a heavier tax burden on the subject as compared to the burden he would have if he were within the jurisdiction of one country.

• Economic double taxation: This occurs when two persons are taxed for the same income

In order to remedy double taxation countries are entering into treaties. The Organisation for Economic Co-Operation and Development is an international body of which set out a model on avoidance double taxation. In substance India follows the UN model which is adapted from the OECD model. Generally such treaties have a tie breaker clause and the treaty decides which country will have the right to tax the individual or corporation involved.

With globalization the focus has shifted from double taxation to double non taxation. Nowadays developed nations are trying to find a way to curb MNE's from avoiding double taxation. In order to do this the following measures have been put in place :

• Controlled Foreign Companies Regime

• Transfer Pricing; and

• Thin Capitalization

The above measures have been recognized by the OECD and have been incorporated in the model law. According to the OECD these measures do not contravene any principles of International Tax.

In India, the Government has been given the authority under Section 90 of Indian Income Tax Act to join in Double Tax Avoidance Treaties (DTAA).