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US Business Urges DTA Ratifications

by Mike Godfrey,, Washington

13 June 2014

The National Foreign Trade Council (NFTC) has joined with other leading business organizations in sending a letter to every United States Senator expressing support for and calling for expeditious action on the bilateral double taxation agreements (DTAs) and protocols currently pending before the Senate.

The NFTC has emphasized that "adoption of these DTAs will ensure US competitiveness abroad and foreign direct investment into the US, and that the tax treaties are critical to the US business community, as evidenced by the signatories on the letter," which include the Business Roundtable, Information Technology Industry Council, National Association of Manufacturers, Organization for International Investment, US Chamber of Commerce and United States Council for International Business.

In the letter, the groups write that: "For over eighty years, DTAs have played a critical role in fostering US bilateral trade and investment while protecting US businesses, large and small, from double taxation of the income they earn from selling goods and services 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 US taxpayers."

"On a reciprocal basis," they add, "DTAs reduce US withholding taxes to encourage foreign companies to invest in the US. Tax treaties help the US economy by allowing US companies to more efficiently conduct their businesses abroad and by making the US more hospitable to foreign investment, which creates and sustains millions of American jobs."

In addition, the letter confirmed that "DTAs contain administrative procedures for US taxpayers, treaty-partner taxpayers, and the US and foreign taxing authorities themselves to resolve disagreements and to assist in the enforcement of the two countries' tax laws. In these and other ways, the US network of over sixty bilateral treaties plays a significant role in advancing the economic interests of the US in the global economy."

The pending DTAs and protocols include the proposed tax treaty with Chile, signed in 2010, the ratification of which was said to represent an important milestone in lowering tax barriers to US companies operating in Latin America; the proposed DTA amendment with Hungary, also signed in 2010, which would close a "treaty shopping" loophole in the existing treaty; and the Swiss and Luxembourg DTA protocols, both signed in 2009, which would, among other measures, update the existing information exchange provisions with those countries.

It was stressed that, in particular, "the Swiss DTA protocol would specifically protect against 'fishing expeditions' by either country, while enabling the US Government to collect US tax revenues from hidden offshore accounts of US tax evaders." The Swiss protocol was ratified by Switzerland on March 5, 2012.

The letter also pointed out that DTAs and protocols such as these have routinely been approved by unanimous consent, and that they have already been reported out of the Senate Foreign Relations Committee without amendment or reservation.

TAGS: compliance | tax | business | double tax agreement (DTA) | tax compliance | Chile | Hungary | law | Luxembourg | enforcement | offshore | agreements | transfer pricing | withholding tax | Switzerland | United States | Tax

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