The American Institute of CPAs is asking the U.S. Senate to quickly consider and approve the various bilateral income tax treaties and protocols that are currently pending in Congress, although some of them have not advanced in years.
The list includes a proposed agreement with Chile that was signed in 2010, and updates to existing treaties with Hungary, Poland, Luxembourg, Switzerland and Japan. Many of the agreements and protocols have been held up in the Senate because of objections by some lawmakers to the Foreign Account Tax Compliance Act, or FATCA, which was part of the HIRE Act of 2010. Some of the proposed agreements involve exchanges of tax information between the U.S. and the tax authorities of other countries.
The AICPA argues the tax treaties and protocols are necessary. “The AICPA believes income tax treaties are vital to United States (U.S.) economic growth as well as U.S. trade and tax policy,” AICPA Tax Executive Committee chair Annette Nellen wrote in a letter last week to leaders of the Senate Foreign Relations Committee. “Tax treaties assist in harmonizing the tax systems of treaty nations and in providing certainty on key issues faced by businesses of all sizes that operate internationally. Tax treaties are also important tools used to promote a competitive environment to attract foreign investment into the U.S.”
Nellen pointed out that the full Senate has not approved an income tax treaty or protocol since 2010 and stated that tax treaties, which apply to both companies and individuals who are engaged in cross-border transactions, remain “pivotal in preventing the imposition of excessive or inappropriate taxes on foreign trade and investment.”
“In order to serve their intended purpose, tax treaties require updating to stay current with developments in the global economy,” she added. “The lack of action by the full Senate to ratify these treaties and protocols impedes the ability of Treasury to keep U.S. tax treaties in line with changes in policy and bilateral relationships. Outdated tax treaties increase the potential for double taxation as well as hinder the ability of the Internal Revenue Service (IRS) and foreign tax authorities to cooperate in the fair and efficient enforcement of tax laws.”
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