[Congressional Record Volume 150, Number 28 (Monday, March 8, 2004)]
[Senate]
[Page S2295]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     UNITED STATES-JAPAN TAX TREATY

  Mr. LUGAR. Mr. President, I rise today in strong support of 
ratification of the United States-Japan Tax Treaty. As chairman of the 
Foreign Relations Committee, I held a hearing on this treaty on 
February 25, where the committee heard testimony on the treaty's 
benefits from the Treasury Department, the National Foreign Trade 
Council, and the United States-Japan Business Council. Our committee 
voted to approve the treaty, along with several other items, by a vote 
of 19 to 0 at a business meeting last week.
  The Japan Tax Treaty is particularly significant due to our expansive 
trade and investment relationship with Japan. The United States and 
Japan are the two largest economies in the world, and account for 
approximately 40 percent of the world's gross domestic product. Japan 
is the fourth largest source of imports to the United States and the 
third largest export market for United States goods. The treaty, signed 
on November 6, 2003, by Treasury Secretary Snow and Japanese Ambassador 
Kato, will improve the ability of United States businesses to expand 
and prosper in Japan. It also will continue to encourage Japanese 
investment in the United States that contributes to the growth of our 
economy.
  The original Japan Tax Treaty was signed in March 1971 and went into 
force in January 1973. Since then, both United States and Japanese 
domestic tax laws have changed dramatically. Until now, the 1971 treaty 
has not been amended to reflect those changes or the monumental 
expansion of the United States-Japanese commercial relationship.
  American companies doing business with Japan are eager for this 
update of the bilateral tax treaty. It will guarantee more equitable 
treatment for United States corporate investors and relief from double 
taxation; it will strengthen dispute resolution mechanisms related to 
tax issues between our countries; and it will eliminate withholding 
taxes on all royalty income, certain interest income, and dividend 
income paid to parent companies.
  The overall benefit of the treaty is that our companies will become 
more competitive in the Japanese market. Japan is currently a party to 
tax agreements with several other nations that reduce double taxation 
for companies from those nations doing business in Japan. Consequently, 
without this treaty, United States businesses will continue to face a 
competitive disadvantage in the area of taxation.
  Following transmittal to the Senate this past December, the Foreign 
Relations Committee engaged in a thorough review and analysis of the 
treaty. Officials from the Department of Treasury briefed the committee 
extensively on the impact of the treaty on business relations between 
the United States and Japan. The committee also consulted with numerous 
commercial entities with operations in Japan. These entities all have 
indicated that the treaty will make them even more competitive in a 
market where they already are successful. In addition, the committee 
has had meetings with commercial officers from the Japanese Embassy to 
discuss ratification and implementation of the treaty.
  I understand that the timing of enactment of the Japan Tax Treaty is 
critical. Therefore, I have prioritized it on the Foreign Relations 
Committee's agenda, and I am grateful to the majority leader for 
bringing it quickly to the Senate floor. I also have written to the 
Japanese Finance Minister and leaders of the Diet to encourage them to 
join us in acting swiftly to bring the treaty into force.
  I want to take this opportunity to thank the Treasury Department and 
its International Tax Counsel Barbara Angus both for their work in 
producing this agreement and for their cooperation with the Foreign 
Relations Committee during the treaty's consideration. I would also 
like to salute the business community, and in particular the National 
Foreign Trade Council and the United States-Japan Business Council for 
their leadership and advocacy on behalf of this treaty.
  Mr. President, this treaty is good for the United States and good for 
our relationship with Japan. I urge my colleagues to vote to ratify it.

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