January 11, 2017

Would US Tax Treaties Need to be Changed to Implement the MAC?

Would existing US tax treaties have to be changed before a Market Access Charge (MAC) could be implemented? The simple answer is, no.

U.S. tax treaties focus on income taxes, and the Market Access Charge (MAC) is not an income tax. The MAC is a user fee, and there is no evidence that user fees are subject to international treaties.

The facts that the MAC is not an income tax, not a tariff, and not germane to merchandise trade appear to remove it completely from the jurisdiction of all US tax and trade treaties. Thus, no conflict.

Consider the following quotes from the IRS and the U.S. Treasury (emphasis added throughout):

Tax Treaty Tables

The IRS only mentions “income tax treaties” and conventions:
“The United States has income tax treaties (or conventions) with a number of foreign countries under which residents (but not always citizens) of those countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain income, profit or gain from sources within the United States. …
"These treaty tables provide a summary of many types of income that may be exempt or subject to a reduced rate of tax. For more details on the whether a tax treaty between the United States and a particular country offers a reduced rate of, or possibly a complete exemption from, U.S. income tax for residents of that particular country, refer to Publication 901, U.S. Tax Treaties."
https://www.irs.gov/individuals/international-taxpayers/tax-treaty-tables

International Tax Treaties and Tax Information Exchange Agreements

The following from the IRS indicates that U.S. tax treaties refer only to income taxes and related information.

“This page posts the texts of recently signed U.S. Income tax treaties, TIEAs, accompanying technical explanations as they become publicly available, and the current U.S. Model Income Tax Convention. Additional International Tax Documents.  This page posts additional documents related to International Income Taxation, including letters to Congress and Testimony."

https://www.irs.gov/individuals/international-taxpayers/tax-treaty-tables

Tax Policy -  International Tax Counsel

The following from the Treasury indicates that Tax Treaties, for which Treasury is responsible, deal only with income taxes:
“The Office of the International Tax Counsel (ITC) develops and reviews policy, legislation, regulations, revenue rulings, revenue procedures, and other published guidance dealing with all aspects of international income tax law.  ITC is responsible for advising the Assistant Secretary (Tax Policy) and other Treasury officials in connection with the formulation of the Administration's international taxation policy; for formulating, analyzing, and reviewing international taxation legislation; and for preparing the Administration’s testimony on such legislation.  ITC advise congressional staff in drafting legislation and in documenting the legislative history of international tax legislation. … 
"In addition, the office is responsible for negotiating and reviewing income tax and estate and gift tax treaties with foreign countries and coordinating tax treaty matters with the State Department and the Congress.” (emphasis added)
https://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-the-International-Tax-Counsel.aspx
In sum, a Market Access Charge (MAC) could be implemented no need to change existing US tax treaties. The same is true with respect to trade treaties and to the rules of the IMF, the WTO, and the OECD.

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