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TEI Urges Senate Foreign Relations Committee Action on Pending U.S. Tax Treaties and Protocols.

On April 19, TEI submitted a letter to the Chair and ranking Member of the Senate Committee on Foreign Relations urging expeditious action to review and approve the many pending bilateral U.S. income tax treaties and protocols transmitted to the Senate over the past decade. TEI's comments were prepared under the aegises of the Institute's U.S. International Tax Committee and Tax Reform Task Force, whose chairs are Sarah Winters and Emily Whittenburg, respectively. Benjamin R. Shreck, TEI Tax Counsel, coordinated the production of TEI's comments.

The bilateral income tax treaties and protocols pending before the Committee on Foreign Relations are important to U.S. economic growth and U.S. trade and tax policy, as well as from tax compliance and administration perspectives. Bilateral income tax treaties and protocols provide certainty for taxpayers conducting cross-border business and assist the Internal Revenue Service in administering the Internal Revenue Code provisions applicable to such multinational business transactions. On behalf of Tax Executives Institute, Inc. (TEI), I ask for your support for these treaties and protocols and for expeditious action on them by the United States Senate.

TEI is the preeminent association of in-house tax professionals, worldwide. Our approximately 7,000 members represent more than 2,800 companies of all sizes and across all industries. The organization is represented by 57 chapters in North and South America, Europe, and Asia. TEI members are responsible for managing the day-to-day tax affairs of their companies, including companies that conduct cross-border business transactions and which rely upon the certainty provided by the U.S. network of bilateral income tax treaties.

Many of the bilateral income tax treaties and protocols pending before the Committee were signed and transmitted to the Senate years ago. (1) Regrettably, the subsequent protracted period of ratification leaves many taxpayers in limbo when planning their cross-border business and tax affairs, as it has become unclear whether a duly negotiated and signed treaty or protocol will ever enter into force. While historically multinational taxpayers could count on such tax treaties and protocols entering into force in short order, that is no longer the case and the concomitant uncertainty results in many foregone business opportunities for both U.S. and foreign based companies that would benefit the U.S. economy.

Moreover, income tax treaties play a critical role in fostering U.S. bilateral trade and investment and protecting U.S. businesses, large and small, from double taxation of the income they earn from conducting business in foreign markets. Tax treaties do so primarily by reducing foreign withholding taxes and otherwise restricting the ability of the foreign treaty partner to tax the income of U.S. taxpayers. In return, the United States grants similar relief to foreign companies to encourage them to invest domestically. Where both countries have the right to tax an item of income under the treaty, the treaty seeks to avoid double taxation by requiring one of the countries to allow a credit for the other country's tax (or to exempt the income from its own tax). Tax treaties support the U.S. economy by allowing U.S. companies to more efficiently conduct their businesses abroad and by making the United States more hospitable to foreign investment.

In addition, tax treaties contain administrative procedures for U.S. taxpayers, treaty-partner taxpayers, and the U.S. and foreign taxing authorities to resolve disagreements regarding who has the right to tax a taxpayer's income (and how much tax should be paid) and to assist in the enforcement of the two countries' tax laws. In these and other ways, the U.S. network of over 60 bilateral income tax treaties plays a significant role in advancing the economic interests of the United States in the global economy. Expediting action on the pending treaties and protocols would further advance those interests.

Many income tax treaties and protocols with provisions similar to those pending before the Committee were approved by unanimous consent. The treaties promote sound, economically-based business and financial decisions determined by market principles rather than government interference. The treaties and protocols incorporate changes and modernizations that should foster economic growth and build on long-term relationships between the United States and its treaty partners. Moreover, the treaty provisions providing for relief from double taxation and prompt resolution of disputes among treaty partners provide needed certainty to the multinational business community in planning their tax affairs. The contents of the treaties and protocols are the product of years of dialogue among the members of your Committee, the Joint Committee on Taxation, and the Executive Branch, along with interested stakeholders in the United States and abroad. Finally, the bilateral tax treaties and protocols pending before the Committee include provisions approved by the Senate many times over and thus approval of the pending treaties and protocols should not be controversial.

Given the substantial economic, foreign relations, and tax policy benefits at stake, TEI encourages prompt consideration and approval of these pending tax treaties and protocols by the United States Senate.

TEI's letter was jointly prepared under the aegises of its U.S. International Tax Committee and Tax Reform Task Force. Should you have any questions regarding TEI's comments, please contact the Task Force's chair Emily Whittenburg at 832.337.0827 or emily., or Benjamin R. Shreck of the Institute's legal staff at 202.464.8353 or

(1) The pending bilateral treaties and protocols include: the proposed tax treaty with Chile, signed in 2010; the proposed tax treaty with Hungary, also signed in 2010; the Swiss and Luxembourg treaty protocols, both signed in 2009; the proposed protocol with Spain, updating the tax treaty signed in 1990; the proposed Polish Tax Treaty replacing the treaty signed by the United States and Poland in 1974; and the Japanese treaty protocol signed in 2013.
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Title Annotation:Tax Executives Institute
Publication:Tax Executive
Date:Jul 1, 2019
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