WASHINGTON, DC – National Foreign Trade Council President Bill Reinsch called for the ratification of international tax protocols with France and Sweden and a new tax treaty with Bangladesh in testimony presented today before the Senate Foreign Relations Committee.
Bilateral tax treaties facilitate trade by harmonizing the tax systems of two countries with respect to cross-border transactions and investments.
“Foreign trade is fundamental to the economic growth of U.S. companies. Tax treaties are a crucial component of the framework that is necessary to allow that growth,” said Reinsch. “This is why the NFTC has long supported the expansion and strengthening of the U.S. tax treaty network and why we are here today to recommend ratification of the Tax Treaty with Bangladesh and the Protocols with Sweden and France.”
Tax treaties eliminate double taxation by allocating taxing jurisdiction over the income between the two signing countries. The tax systems of most countries impose withholding taxes, frequently at high rates, on payments of dividends, interest, and royalties to foreigners, and treaties are the mechanism by which these taxes are lowered on a bilateral basis. If U.S. enterprises earning such income abroad cannot enjoy the reduced foreign withholding rates offered by a tax treaty, they are at a competitive disadvantage relative to traders and investors from other countries that do have such benefits. Tax treaties serve to prevent this barrier to U.S. participation in international commerce.
Reinsch indicated that for years the NFTC has advocated the elimination of the withholding tax on related-entity dividends, and is pleased that the Treasury Department has included this important provision in the Swedish Protocol.
“American businesses must be able to participate fully in business activities throughout the world, through the export of goods, services, technology, and entertainment, and through direct investment abroad. As global competition grows ever more intense, it is vital to the health of U.S. enterprises and to their continuing ability to contribute to the U.S. economy that they be free from excessive foreign taxes or double taxation and impediments to the flow of capital that can serve as barriers to full participation in the international marketplace,” Reinsch stated.
The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.