USCIB “Very Concerned” with Proposed Changes to US Model Income Tax Treaty

USCIB sent a letter to the U.S. Treasury on September 14 expressing concern with proposed U.S. model tax treaty changes, which in part attempt to prevent double non-taxation of income between tax treaty partners.

While acknowledging that the treaty provisions address legitimate concerns, USCIB said that the draft provisions “tilt too far in their attempt to prevent inappropriate claims of treaty benefits.”

USCIB argued that because tax treaties are designed to promote cross-border trade and investment, if treaty benefits aren’t granted to legitimate claimants, then the treaty will fail in its fundamental purpose.

The letter also said that the draft provisions aren’t clear, raising questions about how the changes will be interpreted, and noted that clarity is important to taxpayers, tax authorities and treaty negotiators and legislatures.

USCIB also raised concerns about how the proposed changes will be implemented, and said that “these rules may be unacceptable to a substantial number of existing U.S. treaty partners.”

Read USCIB’s letter.

The letter concludes that the proposed changes to U.S. model income tax treaties are not a good way to address concerns about double non-taxation, and the changes may also have the unintended consequence of making tax treaties more difficult to negotiate.

Staff Contact:   Carol Doran Klein

VP and International Tax Counsel
Tel: 202.682.7376

Carol Doran Klein manages USCIB’s Taxation Committee and represents member views on key tax policies and initiatives to the U.S. government and to various international forums. She also serves as vice chair on the executive bureau of the BIAC Tax Committee, where she represents the views of U.S. business. As vice chair she participates in meetings with senior OECD secretariat officials and members of the OECD’s Committee on Fiscal Affairs.
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