[Senate Treaty Document 112-5]
[From the U.S. Government Publishing Office]


112th Congress
2d Session                      SENATE                     Treaty Doc.
112-5
_______________________________________________________________________
 
PROTOCOL AMENDING THE CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN 

                              TAX MATTERS

                               __________

                                MESSAGE

                                  from

                     THE PRESIDENT OF THE UNITED STATES

                              transmitting

     THE PROTOCOL AMENDING THE CONVENTION ON MUTUAL ADMINISTRATIVE 
     ASSISTANCE IN TAX MATTERS, DONE AT PARIS ON MAY 27, 2010 (THE 
 ``PROPOSED PROTOCOL''), WHICH WAS SIGNED BY THE UNITED STATES ON MAY 
                                27, 2010




 May 17, 2012.--Treaty was read the first time, and together with the 
accompanying papers, referred to the Committee on Foreign Relations and 
            ordered to be printed for the use of the Senate

                         LETTER OF TRANSMITTAL

                              ----------                              

                                     The White House, May 17, 2012.
To the Senate of the United States:
    I transmit herewith, for the advice and consent of the 
Senate to its ratification, the Protocol Amending the 
Convention on Mutual Administrative Assistance in Tax Matters, 
done at Paris on May 27, 2010 (the ``proposed Protocol''), 
which was signed by the United States on May 27, 2010. The 
existing Convention on Mutual Administrative Assistance in Tax 
Matters, done at Strasbourg on January 25, 1988, entered into 
force for the United States on January 4, 1995 (the ``existing 
Convention''). I also transmit, for the information of the 
Senate, the report of the Department of State, which includes 
an Overview of the proposed Protocol.
    The proposed Protocol amends the existing Convention in 
order to bring it into conformity with current international 
standards on exchange of information, as reflected in the 
Organization for Economic Co-operation and Development's (OECD) 
Model Tax Convention on Income and Capital and the current U.S. 
Model Income Tax Convention. Furthermore, it updates the 
existing Convention's rules regarding the confidentiality and 
permitted uses of exchanged tax information, and opens the 
existing Convention to adherence by countries other than OECD 
and Council of Europe members. The Protocol entered into force 
on January 6, 2011, following ratification by five parties to 
the existing Convention.
    I recommend that the Senate give early and favorable 
consideration to the proposed Protocol and give its advice and 
consent to its ratification.
                                                      Barack Obama.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                        Washington, March 25, 2011.
The President,
The White House.
    The President: I have the honor to submit to you, with a 
view to its transmission to the Senate for advice and consent 
to ratification, the Protocol Amending the Convention on Mutual 
Administrative Assistance in Tax Matters done at Paris May 27, 
2010 (the ``proposed Protocol'') which was signed by the United 
States on May 27, 2010. The Convention on Mutual Administrative 
Assistance in Tax Matters, done at Strasbourg January 25, 1988 
(the ``existing Convention''), entered into force for the 
United States on January 4, 1995. The proposed Protocol amends 
the existing Convention in order to bring it into conformity 
with current international standards on exchange of 
information, as reflected in the Organization for Economic Co-
operation and Development (OECD)'s Model Tax Convention on 
Income and Capital and the current U.S. Model Income Tax 
Convention. Furthermore, it updates the Convention's rules 
regarding the confidentiality and permitted uses of exchanged 
tax information, and opens the Convention to adherence by 
countries other than OECD and Council of Europe members 
(subject to the unanimous consent of the parties to the 
Convention). The Protocol entered into force on January 6, 
2011, following ratification by five parties to the existing 
Convention. An overview of the proposed Protocol amending the 
Convention is enclosed in this report.
    The proposed Protocol is self-executing. I recommend that 
the proposed Protocol be transmitted to the Senate for its 
advice and consent to ratification. The Department of the 
Treasury and the Department of State cooperated in the 
negotiation of the proposed Protocol, and the Department of the 
Treasury joins the Department of State in recommending that the 
proposed Protocol be transmitted to the Senate as soon as 
possible for its advice and consent to ratification.
            Respectfully submitted.
                                            Hillary Rodham Clinton.
    Enclosures: As stated.
                                Overview

    The Convention on Mutual Administrative Assistance on Tax 
Matters (the ``existing Convention''), provides for the 
exchange of information between the Parties that is foreseeably 
relevant for the administration or enforcement of their 
domestic tax laws. Only member States of the Council of Europe 
and Member countries of the OECD are eligible to join the 
existing Convention.
    The proposed Protocol was negotiated to bring the existing 
Convention into conformity with current international standards 
regarding the exchange of information. As of February 1, 18 
States have signed and five States have ratified the proposed 
Protocol, which entered into force on January 6. This overview 
describes the provisions of the proposed Protocol.


                               article i


    Article I of the proposed Protocol amends the Preamble of 
the existing Convention. Paragraph 1 revises the recital that 
States should not carry out measures or supply information 
except in conformity with their domestic law and practice by 
deleting the reference regarding conformity to domestic law and 
practice. The replacement recital provides that States should 
carry out measures or supply information, while preserving the 
recital that such information sharing should take account of 
the necessity of protecting the confidentiality of information 
and taking account of international instruments for the 
protection of privacy and flow of personal data. Paragraph 2 
adds a recital to the existing Convention noting that a new 
cooperative international information exchange environment has 
emerged, and that it is desirable in this context for a 
multilateral instrument for information exchange to be made 
available to the widest number of States in order to obtain the 
benefits of this new environment.


                               article ii


    Article II of the proposed Protocol amends Article 4 
(General provisions) of the existing Convention. It replaces 
the existing paragraph 1 of Article 4 with a new paragraph 1 
that requires the Parties to exchange any information that is 
foreseeably relevant for the administration or enforcement of 
their domestic laws concerning the taxes covered by the 
existing Convention. Article II of the proposed Protocol also 
deletes paragraph 2 of Article 4 of the existing Convention, 
which required the requesting Party to obtain prior 
authorization from the supplying Party in order to use the 
supplied information as evidence before a criminal court in the 
absence of a mutual agreement between the relevant Parties to 
waive the authorization requirement. These revisions ensure 
that exchange of information for both civil and criminal 
matters is covered under the Convention, and bring the existing 
Convention into closer conformity with current internationally 
agreed standards, which are also reflected in the OECD's Model 
Tax Convention on Income and Capital (the ``OECD Model'') and 
the 2006 U.S. Model Income Tax Convention (the ``U.S. Model'').


                              article iii


    Article III of the proposed Protocol amends Article 18 
(Information to be provided by the applicant state) of the 
existing Convention. The existing Convention specifies that a 
request for assistance shall indicate, where appropriate, the 
name, address, and other particulars to identify the subject of 
the request. In some situations, however, the name of the 
person under examination is not known to the applicant Party, 
but it may have other information sufficient to identify the 
person. Article III amends paragraph 1.b of Article 18 of the 
existing Convention to provide that a requesting Party may 
provide the name, address, ``or'' any other identifying 
particulars of the person in respect of whom the request is 
made. This amendment is intended to provide for an efficient 
and effective exchange of information between the Parties. 
Article III also makes a conforming change to the existing 
Convention to address deletions to the existing Convention made 
by Article IV and V of the proposed Protocol (described below).


                               article iv


    Article IV of the proposed Protocol deletes Article 19 
(Possibility of declining a request) of the existing 
Convention, the body of which appears in revised but 
substantially similar form at paragraph 2.g of Article 21 
(Protection of persons and limits to the obligation to provide 
assistance) of the existing Convention, as amended by the 
Article V of the proposed Protocol (described below).


                               article v


    Article V of the proposed Protocol substantially revises 
Article 21 (Protection of persons and limits to the obligation 
to provide assistance) of the existing Convention, which 
relates to the protection of the rights or safeguards of 
persons and the limits of a Party's obligation to provide 
assistance to another Party. Subparagraphs 2 (b) and (d) of 
Article 21, which specify the circumstances under which the 
existing Convention does not impose obligations on the 
requested State, are revised to delete references to 
``essential interests'' of a party as such references are not 
needed and not used in modern agreements for the exchange of 
information for tax purposes. New subparagraph 2 (g) provides 
that a requested state is not obligated to provide 
administrative assistance if the applicant State has not 
pursued all reasonable measures under its laws or 
administrative practice, except where recourse to such measures 
would give rise to disproportionate difficulty. New 
subparagraph (h) provides that a requested State is not obliged 
to provide assistance if the administrative burden is clearly 
disproportionate to the benefit to be derived by the applicant 
State.
    The revised Article 21 also adds two important new 
paragraphs. A new paragraph 3 provides that when information is 
requested by the applicant State in accordance with the amended 
Convention, the requested State is obligated to use its 
information-gathering powers to obtain the requested 
information, even though the requested State may not need such 
information for its own tax purposes. The obligation is subject 
to certain other limitations contained in the Convention, but 
in no case are such limitations to be construed to permit a 
requested State to decline to supply information solely because 
it has no domestic interest in such information. Paragraph 4 
provides that a requested State may not decline to provide 
information solely because that information is held by a bank, 
other financial institution, nominee, or persons acting in an 
agency or fiduciary capacity, or because it relates to 
ownership interests in a person. These paragraphs are based on 
the language of paragraphs 4 and 5 of Article 26 of the OECD 
Model and the U.S. Model, and represent key components of the 
modern international standard with respect to exchange of 
information for tax purposes.


                               article vi


    Article VI of the proposed Protocol revises paragraphs 1 
and 2 of Article 22 (Secrecy) of the existing Convention. These 
amendments concerning disclosure of information provided under 
the Convention bring the confidentiality rules of the existing 
Convention regarding exchanged information and the limitations 
regarding the use of such information into conformity with the 
current OECD and U.S. Models.


                              article vii


    Article VII of the proposed Protocol replaces paragraph 2 
of Article 27 (Other international agreements or arrangements) 
of the existing Convention. The amendment clarifies that 
Parties that are Member States of the European Union can apply, 
in their mutual relations, the possibilities of assistance 
provided by the Convention in so far as they allow a wider 
cooperation than the possibilities offered by the applicable 
European Union rules. This paragraph applies only between 
Member States of the European Union, and in no way prejudices 
the application of the Convention between member States of the 
European Union and other Parties to the Convention.


                              article viii


    Article VIII of the proposed Protocol amends Article 28 
(Signature and entry into force of the Convention) of the 
existing Convention by adding four new paragraphs. Three of the 
new paragraphs provide procedural rules regarding the effective 
dates of the provisions of the proposed Protocol.
    New paragraph 4 provides that any country that is a member 
of the OECD or the Council of Europe which becomes a Party 
after the proposed Protocol enters into force will be a Party 
to the Convention as amended by the proposed Protocol, unless 
it expresses a different intention in writing.
    Most importantly, a new paragraph 5 expands the States that 
may become Parties to the Convention by providing that, once 
the proposed Protocol enters into force, any State that is not 
a member of the Council of Europe or of the OECD may request to 
be invited to sign and ratify the Convention. It further 
provides that decisions to invite such States must be taken by 
consensus of the Parties to the Convention.
    New paragraphs 6 and 7 of Article 28 provide rules for the 
effective dates of the provisions of the proposed Protocol. New 
paragraph 6 provides that the amendments have effect for 
administrative assistance related to taxable periods beginning 
on or after January 1 of the year following the year in which 
the Convention, as amended by the proposed Protocol, entered 
into force in respect of a Party, or where there is no taxable 
period, for administrative assistance related to charges to tax 
arising on or after January 1 of the year following the year in 
which the Convention, as amended by the proposed Protocol, 
entered into force in respect of a Party. However, new 
paragraph 7 provides that, for criminal tax matters the 
Convention, as amended by the proposed Protocol, shall have 
effect in relation to any earlier taxable period or charge to 
tax, from the date of entry into force in respect of a Party.
    Article VIII of the proposed Protocol also amends Article 
30, paragraph 1 of the existing Convention to permit a Party to 
take a reservation to the new paragraph 7 of Article 28 
limiting, with respect to criminal tax matters, the effect of 
the Convention, as amended by the proposed Protocol, to three 
years preceding the year the amended Convention enters into 
force for a Party.


                               article ix


    Article IX provides rules for the signature and entry into 
force of the proposed Protocol. The proposed Protocol is open 
for signature by signatories to the existing Convention. The 
proposed Protocol enters into force on the first day of the 
month following the expiration of a period of three months 
after the date of ratification by five parties to the existing 
Convention. A Party that ratifies the proposed Protocol after 
the proposed Protocol has entered into force will be bound by 
the proposed Protocol beginning on the first day of the month 
following the expiration of a period of three months after the 
date of deposit of its instrument of ratification.


                               article x


    Article X of the proposed Protocol describes the functions 
of the two Depositaries of the Convention, the Council of 
Europe, and the OECD, with respect to the proposed Protocol.


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