Four tax treaty protocols could be considered on the Senate floor this summer after clearing a committee vote June 25.
The protocols would amend existing bilateral U.S. tax treaties with Japan, Luxembourg, Spain, and Switzerland.
The Senate Foreign Relations Committee voted to advance the treaties, despite efforts by Sen. Rand Paul (R-Ky.) to attach amendments that would limit information sharing. The Senate hasn’t ratified a tax treaty since 2010 because of Paul’s objections that the treaties compromise the privacy of American citizens. The treaties have cleared the committee before—most recently in 2015—but weren’t considered on the Senate floor.
“Because they will not include privacy protections for taxpayers, I won’t give them an abbreviated form where they can pass it by unanimous consent,” when the treaties are before the full Senate, Paul said after the meeting. A floor vote to pass the treaties will cost the Senate far more time than unanimous consent, the procedure the Senate has often used in the past for tax treaties.
This time, Senate Majority Leader Mitch McConnell (R-Ky.) is likely to give floor time to the treaties, according to sources familiar with the matter. “These tax treaties are extremely important to a number of American businesses,” McConnell said on the Senate floor June 25 before the committee met. McConnell’s office said they didn’t have a comment beyond what he said on the Senate floor.
Sen. Rob Portman (R-Ohio), who voted and spoke against Paul’s amendments at the committee meeting, said it was important to pass the treaties because they help prevent companies doing cross-border business from being taxed twice on the same income, and that the information-sharing standards in tax treaties help the U.S. crack down on cross-border tax evasion.
“These are relevant treaties for Americans, our economy, but also important for our allies,” he said. “It’s been far too long.”
There are also three new tax treaties pending before the Senate, with Chile, Hungary, and Poland. They haven’t yet gone in front of the committee in part because Sen. Bob Menendez (D-N.J.) was concerned about reservations the Treasury Department added to ensure the treaties wouldn’t conflict with 2017 tax law provisions aimed at preventing tax base erosion.
In comments earlier in the day, Finance Committee Chairman Charles Grassley (R-Iowa) urged swift action on the protocols and encouraged Foreign Relations to take up the three new tax treaties as soon as possible.
“After years of discussion and debate, the time has come to move forward on all of these bilateral agreements,” he said.