The market for derivatives is a global business but the taxation rules that support it remain largely based on traditional domestic rules. In many countries these domestic tax rules remain inconsistent for economically comparable transactions. There are even wider gaps in international tax rules where financially equivalent products can be taxed under widely varying tax regimes. This is largely because the majority of tax legislators are suspicious of derivatives and assume that financial instruments are used simply to change the timing, character and source of income. The industry has been campaigning for reforms. Yet there is a continued lack of domestic legislative willingness to address this issue and even less
international cooperation in the field. On the other hand, the increasing convergence in the financial services markets, e.g., insurance, securitization and credit protection and the steady stream of new and innovative products contrast with the slow pace of legislation which often leaves tax rules out of date. At the international level, homogeneous tax regimes and particularly multilateral treaties tend to be difficult to implement. There is however a consensus that more consistent domestic and international tax frameworks can have a positive impact on derivatives markets. Some countries namely the US, Canada, Australia and the United Kingdom have made giant strides.