Senate ratifies long-stalled tax treaty

The Senate on Tuesday ratified a protocol updating a tax treaty between the U.S. and Spain — the first of four agreements that are slated to get a vote this week after they were stalled for years.

The protocol with Spain was approved by a vote of 94-2. Sen. Rand Paul (R-Ky.), who has long objected to the treaties the Senate is considering, and Sen. Mike Lee (R-Utah) were the only two “no” votes. Four Democratic senators who are running for president did not vote.

The Senate is also expected to vote on updates to tax treaties with Switzerland, Japan and Luxembourg on Wednesday. 

The U.S. has bilateral tax treaties with other countries to prevent taxpayers’ income from being doubly taxed and to ensure taxpayers aren’t avoiding taxes. The protocols before the Senate this week make updates to four treaties. Several of the protocols reduce withholding taxes, and several include provisions that are designed to resolve tax disputes more quickly.

The treaty agreements have been pending for a number of years and have been approved by the Senate Foreign Relations Committee on multiple occasions. But they have been held up because Paul has expressed concerns that information-sharing provisions would weaken taxpayers’ privacy rights. Paul’s objections have prevented the treaty protocols from passing by unanimous consent, meaning they needed Senate floor time to get votes. 

Paul said that he supports the gist of the treaties but has wanted to negotiate putting more taxpayer protections in them. He said the negotiations he’s been involved in with the Trump administration were “sabotaged” by Senate Majority Leader Mitch McConnell (R-Ky.) when he decided to bring the treaty amendments forward for votes in the midst of the negotiations.

“This is very disappointing to me because I think we were at the point of actually achieving a deal that would protect the privacy of Americans,” Paul said on the Senate floor Tuesday afternoon.

A GOP aide said earlier Tuesday that the treaties have been languishing for years and that McConnell saw an opening to give them floor time.

McConnell said on the Senate floor that there are businesses in Kentucky, the home state of both McConnell and Paul, that have an interest in seeing the treaty updates ratified. He referenced North American Stainless, which has ties to Spain, and a facility in Kentucky that makes Hot Pockets, whose parent company is Swiss-based Nestle.

“Senate ratification of these protocols would mean less confusion, more certainty and often fewer taxes for U.S. job creators — and by the way a simpler rulebook for overseas investors who want to invest their money here,” he said.

Paul offered an amendment Tuesday to the Spain agreement that was aimed at safeguarding taxpayer privacy as well as an amendment that would have the agreement apply in the U.S. retroactively to the beginning of the year. But his amendments were rejected.

Senate Foreign Relations Committee Chairman Jim Risch (R-Idaho) said that the treaties “protect taxpayer information in a manner consistent with decades-long established standards and practices under U.S. domestic law.” He said that Paul’s amendments could have potentially delayed ratification by years.

In addition to the updates to tax treaties that the Senate is considering this week, there are also three new or effectively new tax treaties that await action by the chamber. The Treasury Department is working with lawmakers to ensure that those treaties aren’t inconsistent with a portion of President Trump’s 2017 tax law.