Tax treaty update - Senate approval of tax agreements with Chile, Switzerland blocked 

June 4: Senate Foreign Relations Committee Chairman Bob Menendez (D-NJ) today moved that the Senate approve the pending United States-Chile income tax treaty, and Sen. Ben Cardin (D-MD) moved that the Senate approve the pending Protocol with Switzerland, but Sen. Rand Paul (R-KY) objected to their unanimous consent motions.

Paul contended, as he has previously, that the information exchange provisions of these treaties encroach on U.S. citizens’ right to privacy.

Ratification procedure

Unanimous consent motions are the customary procedure for Senate approval of tax treaties, and any senator may prevent approval by objecting. A two-thirds vote after unlimited debate is otherwise required by the Treaty Clause of the U.S. Constitution for ratification.

Senator Menendez said he would ask Majority Leader Harry Reid (D-NV) to schedule a vote, in light of the objections of one senator.

Pending treaties, Protocols

The Obama administration in May 2012 transmitted to the Senate the income tax treaty with Chile* and, in May 2011, the Protocol** to amend the existing income tax treaty with Switzerland.

*Formally, the Convention between the Government of the United States of America and the Government of the Republic of Chile for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, as signed in Washington on February 4, 2010, with a Protocol Signed the Same Day, as Corrected by Exchanges of Notes Effected February 25, 2011, and February 10 and 21, 2012, and a Related Agreement Effected By Exchange of Notes on February 4, 2010.

**Formally, the Protocol Signed at Washington on September 23, 2009, Amending the Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, Signed at Washington on October 2, 1996, as Amended by the Protocol Signed on October 2, 1996.

The Senate Foreign Relations Committee has approved and reported five tax treaties and Protocols that are awaiting Senate approval—i.e., the agreements with Switzerland, Luxembourg, Hungary, and Chile, and a Protocol amending the OECD convention on mutual administrative assistance in tax matters. Read TaxNewsFlash-United States (February 2014).

Approval of these agreements faced similar objection last year.

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