Australia And US Exchange Instruments Of Ratification For Tax Treaty

by Mike Godfrey, for LawAndTax-News.com, Washington

14 May 2003

United States Treasury Secretary, John Snow met with Australian Ambassador to the US, Michael Thawley on Monday to exchange instruments of ratification for the Protocol amending the United States-Australia Income Tax Convention.

The Protocol, which was signed in Australia in September 2001 and came into force this week, amends the 1982 bilateral treaty.

Speaking at the ratification ceremony, the Treasury Secretary explained that:

'The US-Australia tax treaty relationship has served the intended purpose of eliminating tax barriers to cross-border trade and investment. But we can always make improvements and this Protocol will make our treaty relationship even better. The provisions of this Protocol represent significant advances that will further eliminate tax barriers and thus facilitate trade and investment between our countries.'

He continued:

'The Protocol that will enter into force today brings the existing treaty into greater conformity with US tax treaty policy, while also reflecting some provisions found in the Australian model tax treaty.
The Protocol reflects the ever increasing importance of international activity to both our economies.'

According to Mr Snow, the Protocol is only the second US tax agreement to completely eliminate cross-border withholding tax on certain dividends paid by subsidiaries to their parent companies, and is also unusual in the substantial reductions in source-country withholding tax that it provides for royalties and certain types of interest payments.

Last summer, the Australian Parliamentary Treaties Committee recommended that the Australian Taxation Office (ATO) seek more information about the net benefits of an amended bilateral taxation treaty between the two countries, arguing that ratification of the treaty would cost the Australian Treasury in the region of $190 million per year in lost revenue.

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