Committee Urges ATO Not To Ratify US Double Tax Treaty

by Mary Swire, Tax-News.com, Hong Kong

25 June 2002

The Australian Parliamentary Treaties Committee has recommended that the Australian Taxation Office (ATO) seek more information about the net benefits of a bilateral double taxation treaty between Australia and the United States before ratifying the terms of the convention, which are now twenty years old.

The ATO has argued that the tax agreement - which allows public companies to bring back profits made by their US subsidiaries without paying additional tax - is necessary in order to adapt to the changing international business climate and address concerns raised by Australian companies over high US withholding tax rates.

However, tax experts have warned that ratification of the treaty is likely to cost the Treasury up to $190 million per year in lost revenue. There are also concerns that a 'piecemeal' approach - making agreements with individual countries - will merely add to the confusion already present in the country's international business sector, and that the ATO would be better advised to wait until after the long-awaited review of the Australian international tax regime before implementing any more changes.

Speaking to ABC News on Monday, Committee Chairwoman, Julie Bishop confirmed that the advisory body shares this view, announcing that:

'The committee has recommended further that the Australian Taxation Office consult with the Australian Treasury and other interested parties to develop an effective methodology to quantify the economic benefits of double tax agreements.'

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