Repeal of Certain Tax Treaty Benefits Will Not Be in Senate Farm Bill, Baucus Says



By Brett Ferguson

Senate Finance Committee Chairman Max Baucus (D-Mont.) told reporters Aug.
1 that the Senate's version of a farm reauthorization bill will not include
the same tax treaty "loophole closers" used in the House bill (H.R. 2419).

To offset $4 billion of increased spending on the food stamp program, House
Democrats added a change to tax code Section 894 that would require U.S.
subsidiaries of foreign companies to pay the higher of the withholding
rates between a payment made directly to the parent foreign corporation, or
a payment made to the subsidiary in a country with a tax treaty with the
United States.

The change was aimed at ensuring that foreign companies doing business in
the United States could not avoid paying at least as much in taxes as they
would if they were based in the United States by using offshore tax havens.

Sen. Charles Grassley (R-Iowa), ranking member of the Senate Finance
Committee, told BNA July 31 that the language in the House bill actually
could reduce revenues to the United States because violating the tax
treaties with other countries could hurt the Internal Revenue Service's
ability to track the activities of "tax cheats" sending money to other
countries.

"There are transparency provisions we have with some countries so we can
get information through their banking system that would tell us about
cheating in this country. I would not want to give up that cooperation ...
because it might keep us from getting information about a lot of other
people cheating that's way beyond this one narrow provision in the House
bill," Grassley said.

Baucus said he has spoken to Senate Agriculture Committee Chairman Tom
Harkin (D-Iowa) about it, and said it would not be a good addition to the
bill. Baucus said he would consider other types of offsets, but did not
suggest new types of revenue raisers that could be used in the bill.