Treaties For Avoiding Double Taxation And The Bolivarian Constitution

Thoughts on the Action for Nullity of the Treaty between Venezuela and the United States of America on the basis of Unconstitutionality

We are awaiting one of the most transcendental decisions entrusted in the Constitutional Chamber of the Supreme Justice Tribunal in its short existence, not only due to the consequences that could arise in terms of the exchange of investments, financing and technology between Venezuela and the United States of America, but also by the repercussions it could have in respect of the network of conventions for the avoidance of double taxation ("DTCs") and for investment promotion and protection of investments ("CPPIs") in force in our country.

The Supreme Justice Tribunal was asked in late April 2000, to rule on the alleged unconstitutionality of the Memorandum of Ratification of the Convention subscribed between the Government of the Republic of Venezuela and the Government of the United States of America for the avoidance of double taxation and for the prevention of evasion with respect to taxes on income and capital ("DTC VZLA-USA"), and its additional protocol, executed in Caracas on January 25, 1999, which had just entered into force on January 1, 2000.

At the proceedings, in addition to the representation of the National Assembly and the Office of the Attorney General of the Republic, the National Investment Promotion Council (CONAPRI) also attended and opposed the action, i.e., to defend the Constitutionality of the DTC VZLA-USA.

The suit was not surprising, sinceit merely embodies what has been the line of thought of the claimants with regards to their views pertaining to Venezuelan public finance policies and the treatment of foreign investment in Venezuela, as laid out in their writ (and in another suit filed against the Investment Promotion and Protection Law, recently downturned by the Constitutional Chamber of the Supreme Justice Tribunal), and it clearly extends beyond the mere analysis of the provisions of the DTC VZLA-USA as sitting under the Constitutional framework.

Regardless of our philosophical and economic considerations on DTCs as adequate and desirable means of avoiding the pathological phenomena of double taxation and fiscal evasion, and as stable framework resulting in certainty for investments to and from Venezuela, as we are dealing with an action for nullity due to unconstitutionality, I shall solely refer to its legal aspects, both in what refers to the arguments of the claimants...