Anti treaty shopping provisions to collect $7.4 billion for people impacted in Ground Zero clean up

After making drastic changes to cross border tax regime to pay school teachers last month, it seems international tax provisions are at the rescue again. The House last week voted 268-160 to advance legislation providing $7.4 billion to people seriously impacted at Ground Zero during the 9/11 clean up. The cost will be paid for by preventing “treaty shopping.”

Treaty shopping can be used to avoid paying U.S. taxes when a taxpayer claims to be a tax resident of a treaty favored jurisdiction. It occurs when for instance, multinational companies located in a country without a U.S. tax treaty receive U.S. income through a subsidiary in another country that has a treaty with the U.S. to avoid paying U.S. taxes. Number of recently concluded U.S. tax treaties contain anti treaty shopping provisions.

The bill subjects a withholding tax on subsidiaries serving as a conduit to firms without a treaty. The provision raises approximately $7.4 billion over ten years and is aimed at treaty shopping used by multinational companies incorporated in tax haven countries.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s