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.”
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.