IFA 2008 Brussels Congress: USA Branch Report: Non-Discrimination at the Crossroads of International Taxation
Cahiers de Droit Fiscal International, Vol. 93b, 2008
33 Pages Posted: 17 Oct 2007
This is the Report of the United States Branch of the International Fiscal Association (IFA) to the 2008 IFA Congress in Brussels. The Report covers Subject I of the Congress, Non-Discrimination at the Crossroads of International Taxation.
It is not entirely clear why the United States includes nondiscrimination articles in its bilateral tax treaties, but obviously there is the feeling that "discrimination" against a national or resident of a fellow treaty partner is not a good thing. The apparent thinking is that when two countries enter into an income tax treaty together, they do so on the basis of friendship and mutual respect, and thus they should treat each other's nationals and residents as their own, at least when they are "in similar circumstances." Part I of the Report reviews the nondiscrimination article in the U.S. Model Tax Treaty and interpretations of the U.S. Model as well as treaties in force by the U.S. Treasury Department and U.S. courts. Part I also makes suggestions for improvement of the nondiscrimination article of the U.S. Model Treaty.
Part II analyzes prohibitions of tax discrimination contained in sources other than U.S. tax treaties, including the Constitution, friendship, commerce and navigation treaties (FCNs), bilateral investment treaties (BITs), the International Convention on Civil and Political Rights, the NAFTA, the WTO agreements, and customary international law. While the U.S. Constitution contains several provisions that the Supreme Court has interpreted to provide protection from tax discrimination - including the Due Process, Privileges and Immunities, Equal Protection and the Commerce Clauses - cases invoking those protections have mostly involved tax discrimination by U.S. states against residents of other U.S. states, so it is unclear to what extent they protect foreign tax residents. Part II concludes that U.S. trade treaties do not provide nonresident aliens and foreign corporations significant protection from tax discrimination by the United States beyond that contained in bilateral tax treaties.
This report will be published in Cahiers de droit fiscal international Vol. 93b. Reports of other Branches and USA Branch Reports for past Congresses are available on the website of the International Bureau of Fiscal Documentation.
Keywords: tax discrimination, nationality discrimination, residence, tax treaties, Commerce Clause, trade treaties
JEL Classification: H20, H24, H25, K34
Suggested Citation: Suggested Citation