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Tax treaty ‘pool rules’ needed to ensure no double-taxation horseplay

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If you’ve ever been to a public swimming pool, you’re familiar with the “pool rules” posted near the water: No diving, no running and no horseplay. 

These rules exist to keep everyone safe. In the same way, international tax treaties set ground rules among countries — protecting taxpayers from double taxation and giving companies confidence to invest. But for nearly a decade, the Senate has been blocked from approving any of these routine and vitally important treaties.

{mosads}Hundreds of thousands of American jobs are at stake. There’s no telling how much damage has already been done by years of delay. But it’s not too late to fix the problem by approving the seven bilateral tax treaties presently awaiting Senate action.

For nearly 90 years, income tax treaties have played a critical role in encouraging investment and trade. Tax treaties reduce and sometimes eliminate foreign withholding taxes and prevent foreign treaty partners from overtaxing U.S. taxpayers.

Likewise, tax treaties reduce U.S. withholding and encourage foreign companies to invest in America. Tax treaties are a win-win. The proverbial pool is safer and cleaner for everyone involved.

Should there be a dispute, these tax treaties include administrative procedures for resolving disagreements and assisting in the enforcement of tax laws. Given these protections, the United States’ network of over 60 bilateral income tax treaties plays a significant role in advancing our country’s economic interests in the global economy.

The United States has signed seven bilateral tax treaties since 2009. But all seven have been blocked from Senate consideration. For years a single senator has blocked the Senate from acting. However well-intentioned, that action harms the very people he aims to protect. 

The countries covered by these pending treaties are among America’s most significant trading partners. Japan, Luxembourg, Switzerland and Spain are among the largest sources of foreign direct investment into the United States. 

As of 2015, the countries covered by the stalled tax treaties had collectively invested more than $700 billion in our economy. Yet, even that enormous sum pales in comparison to the investment that would have likely occurred had the negotiated tax treaties been ratified years ago. 

Is there something different about these seven stalled treaties than the international tax treaties that came before? No. In fact, on key topics, the language in these treaties is nearly identical to the thousands of tax treaties currently in force around the globe.

Yet, the Senate refuses to ratify the most basic of agreements ensuring fair and equal taxation between our markets. Frankly, it makes us look silly; like that giant pink flamingo float you see at the pool. 

Approving these bilateral tax treaties is simply good governance. Doing so will further enhance the reputation of the United States as a reliable treaty partner and show the world that the U.S. is open for business. 

That’s why on Friday, representatives from the U.S. Department of the Treasury, the Senate Foreign Relations Committee, the Organization for International Investment, the National Foreign Trade Council, the Tax Foundation, General Electric and Emerson will speak at an open forum on Capitol Hill about the urgent need to approve these tax treaties.

The Senate should make sure the “pool rules” are agreed to and posted, by quickly approving all seven tax treaties. 

James Carter is vice president of government affairs for Emerson, a manufacturing and technology company based in St. Louis, Mo. He previously served as the head of tax policy implementation on President Donald Trump’s transition team and was a deputy assistant secretary of the Treasury under President George W. Bush.  Catherine Schultz is the vice president for tax policy at the National Foreign Trade Council.

Tags Base erosion and profit shifting Donald Trump Double taxation International taxation Tax treaty Taxation in the United States treaty

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