By Jay Heflin - 07/20/10 09:58 PM EDT
"It goes without saying that the German Government recognizes the U.S. Government's right to combat tax avoidance and evasion," wrote German Ambassador Klaus Scharioth. "But it is our view that the proposed legislation goes well beyond this objective and, as a result, will be in conflict with provisions of the German-U.S. tax treaty."
Neal has argued an increasing amount of U.S. premiums have migrated offshore simply to avoid taxation. His bill attempts to limit this activity by denying the deduction if premiums that are moved offshore exceed a certain amount.
His provision could raise as much as $15 billion and has gotten considerable attention from lawmakers seeking to offset their legislative priorities.
Scharioth argues in this letter that the bill not only conflicts with the countries' treaty, but it might also be incompatible with World Trade Organization principles.
"[The] German Government has concerns about the legislation's compatibility with WTO principles, particularly with a view to the obligations related to the General Agreement on Trade in Services," the letter states. "Specifically, the German Government would like to refer to the relevant obligations concerning national treatment."
Scharioth concludes: "I would be grateful if you could take into account the concerns of the German Government in your deliberations as you continue to discuss [this] proposal."