[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.