U.S. Senate Approves Long-Delayed International Tax Treaties
(Bloomberg) -- The Senate approved amended tax treaties with four U.S. trading partners that had been stalled for years over taxpayer privacy concerns.
The treaties and supplemental protocols with Spain, Switzerland, Japan and Luxembourg reduce withholding taxes on transactions between U.S. companies and foreign corporations. The treaties spell out which country has the authority to tax which income to avoid having individual and corporate taxpayers from paying taxes both in the country where they are working and their home country.
The agreements were negotiated and signed during President Barack Obama’s administration, with some pending in the Senate since 2010. The treaties had been stalled by objections from Senator Rand Paul, a Kentucky Republican, who argued the treaties compromise privacy because they allow governments to share information about taxpayers.
Supporters of the treaties say that the agreements are critical for cross-border investment so taxpayers can avoid double taxation. Additionally, the information sharing helps governments crack down on tax evasion.
‘A Big Deal’
The approvals of the four treaty updates are “a big deal” for global companies, said Lawrence Pollack, the global head of tax at Hogan Lovells US LLP. “Taxpayers have been screaming for years for this.”
Passage of the agreements comes as the U.S. is in talks with nearly 130 countries about how to tax big technology companies. The discussions are meant to stop countries from imposing their own taxes on U.S. tech giants.
France last week passed a 3% levy that would hit global tech companies with at least 750 million euros ($845 million) in worldwide revenue and digital sales totaling 25 million euros in France. Spain, Italy and the U.K. are among other countries pursuing digital taxes.
“Our actions on these protocols are also timely given international efforts to address the effects of digitalization on the international tax system,” Senate Finance Committee Chairman Charles Grassley said in a speech Tuesday. “These talks are focused on finding a multilateral agreement to these issues and avoiding the regrettable unilateral approach that some countries have taken, notably France.”
Treaties with Poland, Chile and Hungary are still pending in the Senate Foreign Relations Committee.
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