Berkeley Program in Law and Economics

This article compares the two most important methods applied by treaties to avoid international double taxation in order to define which method is more suitable to achieve the objectives pursued by Brazilian diplomacy. It specifies origin, definition, characteristics and special traits from both the credit and the exemption methods. Brazilian diplomacy is examined with regard to international double taxation by referring to all treaties signed by the country and drawing attention to the characteristics which group them. The models employed, the methods chosen and the objectives pursued in the treaties, specially the avoidance of international double taxation, international cooperation among tax authorities and guaranties to tax payers in order to encourage international investments are relevant to the study. The analysis is focused on the effects and characteristics of both methods in regard to Brazilian objectives and perspective. The conclusion verifies why and how the exemption method is more suitable to achieve more international investments, to better prevent simultaneously international double taxation and international tax avoidance, and to concede priority to the Source State, notwithstanding its implication of greater reduction of the tax revenue.