Simmer down kids! “Pool rules,” as some readers may remember from the halcyon summer days of childhood, are the basic safety protocols everyone has to follow in order to allow everyone to enjoy the pool: no running, no diving, and especially no horseplay. As governments around the world clamp down on tax avoidance and tax evasion, international tax treaties need to incorporate “pool rules” to prevent a particularly nasty kind of horseplay – double taxation – according to an op-ed by James Carter and Catherine Schultz, published in The Hill.
- Income tax treaties have been in use for over 90 years and help American taxpayers avoid having to pay foreign taxes on income they have already been taxed on in the U.S.
- Tax treaties also lower U.S. withholding, encouraging foreign companies to invest more.
- There are over 60 such bilateral tax treaties between the U.S. and foreign countries.
- Recently, however, the Senate has been blocked from considering new tax treaties by one holdout, Senator Rand Paul, preventing the Senate from approving new tax treaties with major trade partners like Japan, Luxembourg, Switzerland and Spain.
- These countries have already invested $700 billion in the U.S., and might invest more if relieved of the threat of double taxation.
- Representatives from the U.S. Department of the Treasury, the Senate Foreign Relations Committee, the Organization for International Investment, the National Foreign Trade Council, the Tax Foundation, and General Electric are speaking out to highlight the importance of implementing these proposed tax treaties.
- Will the political pressure be enough to persuade the intransigent Kentuckian to change his mind? Only time will tell!