Corporations are heading into the new year bracing for years of costly tax disputes, according to the National Foreign Trade Council's Cathy Schultz. And they'll be fighting with one hand tied behind their back, thanks to Sen. Rand Paul's (R-Ky.) hold on a raft of tax treaties.
Recently released guidelines from the Organization for Economic Cooperation and Development, including new rules on country-by-country corporate financial reporting, will open the door for "a large increase in the number of disputes," Schultz said at an NFTC lunch today.
"There's going to be more disputes because there are going to be mismatches on what people believe apply under the transfer pricing rules and how they're going to be calculated," Schultz said. "Without some of the mandatory binding arbitration provisions that we have in the treaties that are pending in the Senate, some of these disputes could go on for years."
The full Senate has not approved an income tax treaty or protocol since 2010. Agreements with Chile, Hungary, Poland, Luxembourg, Switzerland and Spain, and a protocol to amend a multilateral convention, are pending.
Paul, a GOP presidential candidate, is blocking the treaties on the floor.
"Sen. Paul continues to have concerns about the privacy implications of the treaties," a Paul spokesman said today.
Schultz said, "We expect that companies are going to have money tied up in [disputes] for many, many years to come. ...Without binding arbitration, other countries do not have an incentive - because they're sitting on these companies' money, they don't have a big incentive to try to negotiate" with U.S. authorities.