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Part II Substantive Issues, Ch.9 Coverage of Taxation under Modern Investment Treaties

Thomas W Wälde, Abba Kolo

From: The Oxford Handbook of International Investment Law

Edited By: Peter T Muchlinski, Federico Ortino, Christoph Schreuer

From: Investment Claims (http://oxia.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. date: 14 April 2024

Tax measures — Tax claim — Taxation — Expropriation — Transparency — Most-favoured-nation treatment (MFN) — Fair and equitable treatment standard — Arbitration

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.

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