Wednesday, December 12, 2012

The Disabilities Convention and the making of international law

Tyler Cowan had this to say: "More generally, the U.S. will be most interested in ratifying Conventions only if they bind other nations in a useful way to the United States."

That, I think, sums up US foreign policy: the society of states is by no means a society of equals, therefore neither good faith nor fair dealing is requisite in matters of international negotiation. All that is requisite is the power to bind other nations to your own goals. That certainly explains US foreign policy in international tax: the lopsided (north/south) tax treaty network, the TIEA network, and the growing FATCA network. 


  1. Interesting side story to this. A letter was by 35 Republican Senators back in September saying they didn't want ANY treaties to come up for ratification votes during the lame duck session and if any did they would vote against it. Now maybe I am assuming intelligence were none exits but as I see that has to include the Swiss Treaty protocol that Rand Paul has held up and as I said on another post no Treaty protocol no Swiss IGA. Now as Jim Jatras(one of my DC contacts whom I have heard you will be meeting this weekend)tells Treasury can do whatever the hell they want in signing "Executive" Agreements and would reluctant to let the world know that a single Senator such as Rand Paul can hold up FATCA all by himself however, in my mind if you "support" FATCA and actually think it is good thing you should at the very least demand the group request treaty protocol pass the Senate first before signing this "Model 2" IGA. Additionally as Jim tells me "holds" are not permanent and this is time of the year when the party leaders in the Senate try to get them removed. My personnal opinion is DC is even more screwed than normal(i.e. Fiscal Cliff, No Farm Bill) and the time simply does not exist to take up the Swiss Treaty Group Request Protocol in this session of Congress.

  2. Wow. What an end to a crazy year. What will 2013 bring! Thanks for these comments, very intriguing.

  3. The issue with Paul is not so much his holding of the treaty. "Holding" is more of a secret nefarious process executed on a Senators. The issue is Paul won't give unanimous consent to ratification. This under the Senate rules is not a deal breaker but it means you have to have a cloture vote and then 30 hours of debate in theory "just" on the Swiss Treaty protocol. I personally would love to see the US Senate debate the US Swiss Tax Treaty and international tax policy for 30 hours.(I also believe the Senate would have to debate the Hungary and Luxembourg treaties for 30 hours each too) I have a feeling though many Senators don't share my enthusiasm for that type of debate. I don't have any knowledge of this but I have my suspiscions there is an internal "tea party" hold system where even if Rand Paul isn't on the Senate floor at a particular moment another "tea party" Senator on Paul's behalf and vice versa will refuse unamimous consent on legislation of interest bypassing the Republican leadership. This is what happened on the Disability Treaty the leadership tried to pass it on unanimous consent back in September but Tea Party Senator Mike Lee happened to be in the near empty Senate and objected.

    Now in the old days the US Senate would adjourn rougly on December 20th. Of course this isn't the old days and in fact the Senate typical stays in session until January 2nd to avoid Presidential recess nominations. However, again most Senators want to get out DC before Christmas and they have a lot of work to do. The odds are quite high they won't get unanimous consent for the fiscal cliff so that leaves 30 hours of debate for that, you have the unfinished farm bill, inteligence reauthorization bills quite a bit that needs to be completed before 2013. I just don't know where there is any time left for the the Swiss Treaty. At a certain point the Senate will "stay" in pro forma session but it will only be for five minutes with just the presiding officer. Could the leadership try to move something at that point? Maybe, but I have the feeling again their will be at least one "tea party" Senator in DC throughout the holidays or the Senate might actually adjourn like it used to after they finish the cliff(If they actually finish it).

    If this goes into next year and every day that passes makes that more likely. First I don't think Treasury with a straight face can sign an IGA with the Swiss. Second I personally think it becomes very legitimate when the Senate Foreign Relations Committee takes this up again next as to why the IGA provision are in seperate "Executive" Agreement and not in the main body of the treaty subject to advise and consent. Again this is a discussion Treasury I doubt will want to have but it should be had.

  4. Given how little Americans en masse understand or care about international tax issues, I'm surprised tea party or anyone bothers to spend political capital on these topics. Not sure how SFRC will react to the EA or anyway non-treaty nature of the IGAs. Apathy seems to be the prevailing mood. Those that would benefit from getting rid of FATCA will be perceived as the tax dodger crowd, and there will be many examples available to support that view. Those that benefit from keeping it, tax accountants and maybe US FIs. Political economy says the IGAs go forward on that basis, and worries about international law and diplomacy will fall in the realm of academic niceties, interesting and all that but naive to think they matter in the real world.

  5. Well for one thing American Citizens Abroad is making some progress getting someone to introduce legislation shifting the US to a residency based taxation system which does to a large degree curb the burdens of FATCA. I still say progress as a relative term but if they get actually get legislation introduced to do this it would be a big achievement for "them". To be clear this just shows how far down they are on pecking order in US politics. For most interest groups getting legislation introduced in Congress is relatively easy getting it passed is the hard part.

    One thing to remember is to actually draft legislation to switch the basis of the IRC from citizenship to residency is VERY complex and requires fairly extensive help from JCT, Treasury, and IRS(especially JCT). The process of getting this help is actually more complex than simply getting legislation introduced. Right now the key for ACA is get a formal request from a few members of Congress to get this process started. According to my contacts they have been sucessful in getting verbal committments from multiple members of Congress to do so.

  6. I would be absolutely amazed if a bill like that ever got to a floor, let alone to a vote. I applaud the efforts and the wherewithal and persistence of those souls willing to push ahead despite the massive mountain of political obstacles. There's no reason for the US to tax on the basis of citizenship other than path dependence aka tradition. But path dependence proves really terribly tough to shake.