In a recent letter to the Committee on Foreign Relations, the American Institute of Certified Public Accountants (AICPA) requested that the US Senate urgently approve all pending bilateral double taxation agreements (DTAs) and protocols.
The AICPA pointed out that the full Senate has not approved any DTA or protocol since 2010. Their passage has been blocked to date by Senator Rand Paul (R – Kentucky) on the grounds that they would allow for US citizens’ privacy to be invaded by revealing their tax records to other countries.
However, the association wrote that “income tax treaties are vital to US economic growth as well as US trade and tax policy. Tax treaties assist in harmonizing the tax systems of treaty nations and in providing certainty on permanent establishment rules, a mechanism to relieve double taxation, and other key issues faced by businesses of all sizes that operate internationally.”
“DTAs apply to both companies and individuals who are engaged in cross-border transactions,” it added. “As cross-border trade and investment activities expand, tax treaties remain pivotal in preventing the imposition of excessive or inappropriate taxes. … Outdated tax treaties increase the potential for double taxation as well as hinder the ability of the Internal Revenue Service and foreign tax authorities to cooperate in the fair and efficient enforcement of tax laws.”
In addition, the AICPA noted that “outdated tax treaties increase the potential for double taxation as well as hinder the ability of the Internal Revenue Service and foreign tax authorities to cooperate in the fair and efficient enforcement of tax laws.”
The treaties in question include the new DTA and associated protocol with Chile, which would be only the second such agreement for the US in South America, and which would lower or remove withholding taxes on interest and dividend. An amended DTA with Hungary would close a “loophole that currently allows non-residents of the two treaty partners to obtain US tax benefits by inserting Hungarian companies with no economic substance with the principle purpose of providing access to the treaty for those non-residents.”
In addition, the pending protocols with Luxembourg and Switzerland would update tax information exchange provisions with those countries. For example, AICPA said that the latter, if ratified, would “specifically protect Americans against indiscriminate searches of information by either country by limiting the administrative assistance to individual cases.”
Other treaties awaiting ratification by the US are the new version of the bilateral DTA with Poland, and also an amendment to the existing agreement with Spain.
The AICPA said: “Until 2010, income tax treaties and protocols were timely acted on by the Senate. We respectfully request prompt consideration and approval of these pending tax treaties and protocols.”
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