July 16,2019

Grassley on Tax Treaties and Protocols

Prepared Floor Remarks by U.S. Senator Chuck Grassley of Iowa
Chairman of the Senate Finance Committee
On Tax Treaties and Protocols
Tuesday, July 16, 2019
 
I rise today to express my support for passage of the resolutions of advice and consent that the Senate is considering this week with respect to the protocols to our tax treaties with Spain, Switzerland, Japan and Luxembourg.
 
Tax treaties are an integral part of the architecture of our tax system. For example, they help define the rules of the road for cross-border investment and trade for U.S. individuals and companies doing business in one of our treaty-partner countries, like Spain, and for individuals and companies in those countries doing business in the United States.
 
The protocols before us today provide important updates to the tax treaties with these four countries.
 
In general, several of them lower withholding taxes and include provisions to prevent double taxation.
 
Several provide mechanisms for resolving disputes in a timely manner through mandatory binding arbitration.
 
In addition, they provide important updates to the exchange of information provisions in the underlying treaties.
 
I am aware of the concerns that have been raised regarding the standard used to provide for such exchange of information. The standard provided for in the protocols is that “relevant” information shall be exchanged between the United States and its treaty partner. That standard has been used throughout our treaty network for decades and is also the standard used in U.S. domestic tax law.
 
This issue was raised last month in the Foreign Relations Committee, and an amendment was offered to the resolution regarding the protocol with Spain that would have required a narrower standard. That amendment was appropriately defeated. 
 
If the issue is raised again as an amendment here on the floor, I would urge my colleagues to vote “no” on the amendment.
 
These four protocols have been awaiting action by the Senate for many years. In some cases, it has been nearly a decade.
 
It is important that the Senate fulfill its constitutional duty to provide its advice and consent on tax treaties and protocols.
 
It is also important that our treaty partners know that the United States values these agreements and negotiates these treaties and protocols in good faith, with the expectation that they will be implemented without lengthy delays.
 
Our actions on these protocols are also timely given international efforts to address the effects of digitalization on the international tax system. For the past several months, representatives from the Treasury Department have been actively engaged in negotiations at the Organization for Economic Co-operation and Development, or OECD. 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.
 
Ultimately, if these negotiations are successful, there could be a need for the United States to update its bilateral income tax treaties.
 
It is important that the Senate take action on the pending protocols and send a strong signal to our treaty partners that international tax agreements are a priority for the United States.
 
In addition to moving forward on these four protocols, we have three new income tax treaties with Chile, Hungary and Poland that are awaiting action by the Foreign Relations Committee.
 
I urge Chairman Risch and Ranking Member Menendez to use the wave of momentum that is building this week to move forward those three new treaties and send them to the full Senate as soon as possible.
 
I thank the Chairman and the Ranking Member for moving these protocols to the floor. They were reported favorably by the committee by voice vote without amendment. And their consideration is long overdue. 
 
I also thank Leader McConnell and Minority Leader Schumer for their efforts to bring these protocols up for consideration on the floor this week.
 
I urge all of my colleagues to vote yes on these resolutions of advice and consent.
 

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