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US Administration Pushes For Swiss DTA Update Ratification

by Mike Godfrey,, Washington

02 November 2015

Robert Stack, US Treasury Deputy Assistant Secretary (International Tax Affairs), initiated a further push for ratification of the pending protocol to the US tax treaty with Switzerland at a hearing of the Senate Committee on Foreign Relations on October 29.

Tax treaties and protocols with Switzerland, Luxembourg, Hungary, Chile, Spain, Poland, and Japan, as well as the protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, all await a unanimous vote by the full Senate.

The Swiss protocol, which was originally negotiated in September 2009, would amend the existing 1996 double taxation agreement (DTA). It was sent to the Senate by President Barack Obama in 2011, and has already been approved by the Foreign Relations Committee.

Ratification by the Senate of all pending tax treaties has been delayed by Senator Rand Paul (R – Kentucky). With the US-Swiss DTA protocol allowing for easier account information exchange by Swiss banks with the Internal Revenue Service (IRS) concerning the US customers of Swiss banks, Paul has said its provisions would flout the privacy rights of US individuals and US expatriates.

During his testimony to the hearing, Stack confirmed it is "over five years since the full Senate last gave its consent to a tax treaty." He pointed out that "the proposed [US-Swiss DTA] protocol replaces the existing treaty's information exchange provisions with updated rules that are consistent with current international standards. It will allow the tax authorities of each country to exchange information that would otherwise be protected by the bank secrecy laws of either country."

He added that "it will allow the United States to obtain information from Switzerland whether or not Switzerland needs the information for its own tax purposes, and provides that requests for information cannot be declined solely because the information is held by a bank or other financial institution."

However, Paul has previously stated that, while he does not "condone tax cheats," current treaties require foreign financial institutions to "send the IRS the private records of overseas American bank account holders – no questions asked, and no reasonable suspicion, due process, or court order required." For that reason, he has also been involved in a recent challenge in the US courts to the account reporting requirements of the Foreign Account Tax Compliance Act.

TAGS: individuals | expatriates | court | compliance | tax | double tax agreement (DTA) | tax compliance | Chile | Hungary | law | Luxembourg | Internal Revenue Service (IRS) | ministry of finance | tax authority | agreements | Poland | Spain | Switzerland | United States | Japan | Compliance | Tax

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