Which statement accurately describes tax treaties?

Tax treaties are indeed legally binding agreements between governments that are designed to establish rules for taxation in cross-border scenarios. These treaties primarily aim to avoid double taxation and prevent tax evasion, allowing for a fair allocation of taxing rights over income, such as dividends, interest, and royalties.

By providing a consistent framework for taxation, tax treaties help minimize conflicts and uncertainty regarding how much tax a resident of one country would owe to another country when earning income there. They can also provide for reduced tax rates or exemptions on certain types of income, thus encouraging international trade and investment.

The other options suggest scenarios that do not accurately reflect the nature or function of tax treaties. Informal suggestions without legal power do not capture the enforceable nature of these agreements. Limiting treaties solely to corporate taxes overlooks their applicability to various individuals and types of income. Lastly, stating that they eliminate the need for any tax filing is misleading; while treaties may reduce tax liabilities or offer exemptions, they do not nullify the requirement to file tax returns in many situations. Therefore, understanding tax treaties as binding agreements is crucial for accurately navigating international tax obligations.