A Study On The Improvement Of Tax Clause In International Investment Agreement Concluded By China

In recent years,there has been an increasing number of arbitration cases involving taxation in the field of international investment,which makes the international tax dispute an urgent problem in the practice of investment agreements.Take China as an example,Chinese investors first submitted investment disputes to the International Investment Dispute Resolution Center(ICSID)in 2007.So far,there are five cases of Chinese investors as prosecutors,and China has been sued as host country for twice.Among those cases,the materials of three cases are not disclosed either due to the termination of the arbitration proceedings or the pending of the procedures.Among the remaining four,two cases are related to taxation measures.The emergence of this phenomenon,on the one hand reflects the developing of international investment activities and the increase in tax disputes.On the other hand,it means that states gradually began to accept the arbitration mechanism as a way to resolve international tax disputes.In order to effectively solve the tax dispute,this article attempts to analyze the tax clause in International investment agreements(IIAs)so as to improve the relevant provisions of our country and to reduce disputes.In the case of dispute settlement procedures,tax disputes have long been settled through consultation procedures based on the consideration of national tax sovereignty.However,in recent years,some investment agreements have allowed arbitral proceedings to be applied to tax disputes,which has led to a discussion on the arbitrability of tax issues.This paper will discuss the problems faced by consultation process,and discuss the necessity and rationality of introducing arbitration mechanism to China's tax dispute resolution system.Therefore,this paper is divided into the following four parts:The first part introduces the main elements of the tax clause in IIAs.Since the tax clause in many investment agreements are relatively straightforward and the structure is not complete,in order to achieve the purpose of this paper,it is necessary to introduce the contents of a complete tax clause and then analyzes different parts in detail.Therefore,this part,based on the study of the practice of different countries' treaties,sums up the three elements that the tax clause should include,that is,the exception pattern of the tax clause,the scope of “tax”,and the settlement procedure of the tax dispute.The contents and necessity of those parts are also included in this part.The second part focuses on the exception pattern of the tax clause.First,two types of exceptions that are commonly used in investment agreements are described: appendage exception patterns and specialized exception patterns.The former one only makes an exception to the provisions of investment.The latter sets separate tax terms and is divided into “general exception” pattern,“most exception”pattern,and “few exceptions” pattern depending on the availability and number of exceptions.Secondly,it analyzes the advantages and disadvantages of the treaty practice in China,which is dominated by the appendage exception model,and holds that the protection of our country's tax sovereignty is lacking under this situation.Finally,on the basis of the above analysis,the corresponding improvement measures are put forward,that is,the “most exceptions” model in the special exception clause should beadopted.The third part discusses the scope of “tax”.This part is divided into two sections,the first section describes different provisions in the current investment agreements.The second section analyzes the advantages and disadvantages of China's current treaty practice and put forward suggestions for improvement with consideration of China's national conditions.The “tax” here should contain all taxes.Furthermore,consultant procedure should be set up to allow tax authorities to discuss whether a measure is tax or not when there is inconsistency in their domestic laws and come up with a solution.The fourth part is about tax arbitration procedures.First,it discusses the necessity and feasibility of submitting the international tax issue to arbitration,and thinks that it should be stipulated in the tax clause as a way to solve the tax dispute.Second,a separate administrative consultation procedure should be set up for tax disputes,giving the tax authorities of the two sides a common resolution on specific tax issues,which is binding on the arbitral tribunal,thereby limiting the discretion of the arbitral tribunal.The fifth part,as a summary of the full text,will summarize the conclusions of this paper.