Coverage of Taxation Under Modern Investment Treaties

Abstract

This chapter provides an overview of the regulation of taxation in modern investment treaties and the underlying policies and tensions reflected in the variations of treaty regulation of tax disputes. Section 1 sets the scene for the discussion, placing tax-related investment disputes in the political and economic context. It argues that under the current regulatory state, in which the function of the state has retreated from that of controlling the ‘commanding heights’ of the economy to regulation, the tendency for the state to use tax instruments to ‘squeeze’ foreign investors or for protectionist purposes is very attractive. Section 2 provides an overview of the history of taxation. Section 3 discusses the general scope of coverage of tax under investment treaties, examining how tax is defined in some of the treaties and the shortcomings of those definitions, the type of taxes covered under the treaties and the underlying issues and tensions surrounding such coverage. Section 4 discusses the applicability of core substantive investment protection provisions to tax and the underlying issues and tensions surrounding them. Section 5 examines the treaty formulations on expropriatory taxation and transparency and the policy reasons for the new trend in those areas. Section 6 goes on to consider arbitral jurisprudence on expropriatory taxation. Section 7 discusses joint tax consultation as a means of limiting expropriatory tax measures. Finally, Section 8 deals with taxation and transparency.

Corporate Environmental Responsibility in Investor-State Dispute Settlement

“…28 In many cases, they bring certain benefits to the host state, including greater tax revenue, creation of employment opportunities and skills development, scientific development, transfer of new technologies, and sound management practices through linkages with local firms. 29 In the environmental context, it is observed that the prosperity brought by FDI enables the pursuit of 'higher societal expectations for environmental quality of life', 30 and technological advancement and good practices brought by TNCs may contribute to better environmental protection in the host state. 31 In the human rights context, it is also argued that TNCs, in particular consumer product firms that are concerned with the cost of negative publicity and consumer protests, can be 'a powerful lever for improving local human rights conditions'.…”

No taxation without investment protection: la potestad tributaria en el arbitraje de inversiones

“…Muchos tratados establecen limitaciones específicas para la aplicación de ciertas garantías, o incluso de todo el tratado, a controversias sobre o relacionadas con materia tributaria (Wälde y Kolo, 2008). En inglés, se denominan como cláusulas de carve-out.…”

“…Debe tenerse en cuenta, no obstante, que es común encontrar limitaciones a la aplicación de este estándar en materias tributarias. Por ejemplo, en el caso Occidental contra Ecuador (2004) el tribunal interpretó el BIT Estados Unidos-Ecuador y la limitación de materias tributarias únicamente para casos de expropiación, protección a las transferencias y acuerdos de inversión (Wälde y Kolo, 2008).…”

International Tax Disputes: Between Supranational Administration and Adjudication

“…Such provisions governing the interaction of these regimes attempt to prevent normal international tax issues from being decided in other forums, but they are not completely excluded. There is a long history of state actions directed at foreign investors taking the form of taxation measures, which have been treated as indirect expropriation, and some argue that this has become a more acute problem with the expansion of the regulatory state (Wälde and Kolo 2008). In addition, the very broad nature of the non-discrimination provisions in investment agreements can create opportunities for legal arguments that may be unexpected, unless specific exclusions are inserted.…”

“…Hence, some tax-related cases have been brought under investment agreements. They especially concern claims of discriminatory or retroactive taxation, and windfall or capital gains taxes particularly in extractive industries (Wälde and Kolo 2008;Sidhu 2014;Transnational Institute 2016). The most egregious example has been the long-running dispute concerning the seizure by Russia of the Yukos Oil Corporation, allegedly for tax evasion.…”