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Tax Treaties at Standstill in Senate Over Privacy Issues

Bill Clark/CQ Roll Call
Paul has been blocking tax treaties on the Senate floor over privacy concerns, throwing a wrench into an Obama administration initiative aimed at bringing in tax revenue without actually raising taxes.

Approving tax treaties with other nations used to be relatively routine business on Capitol Hill, but that’s no longer the case.

Kentucky Republican Rand Paul has been blocking tax treaties on the Senate floor over privacy concerns, bringing the process to a standstill and throwing a wrench into one of the Obama administration’s initiatives aimed at bringing in tax revenue without actually raising taxes.

Seemingly arcane and largely procedural agreements on the handling of taxation issues across borders, the treaties are one prong in President Barack Obama’s efforts to rein in tax avoidance, but Paul’s blockade has defied both Treasury Department officials and business advocates who want them ratified.

Paul’s efforts come amid greater debates in tax circles on the nature of international taxation and whether separate agreements, such as those the United States has struck with several countries, may be obsolete when the flows of money and information move rapidly around the world.

That’s not the case Paul is making, however, as he rises to block unanimous consent requests for ratification of the administration’s deals. Instead, Paul has held up pending tax treaties for three years on privacy concerns.

“The vast majority of Americans are law abiding,” Paul said on the Senate floor last week, as Democrats sought approval of an agreement with Chile. “I also don’t think we should agree to a standard that might allow bulk collection of data on everyone who lives overseas.”

The Senate Foreign Relations Committee approved five proposed income tax treaties and protocols — agreements with Chile, Luxembourg, Switzerland and Hungary and a protocol to amend a multilateral convention signed in March 2010. The measures were first approved by the committee in 2011, but have been stalled ever since.

Paul’s objection last week blocked Sen. Robert Menendez, D-N.J., when he asked for unanimous consent to ratify the treaty with Chile, which would be just the second tax treaty between the United States and a South American country.

“This will allow our country to support our companies and provide a level playing field for international investment here in the United States,” Menendez said.

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