Rand Paul Talks Tough with the Treasury on Tax Treaties, Won’t Remove Hold Unless Americans’ Privacy is Protected

Sen. Rand Paul (R-KY) has placed a hold on certain tax treaties and protocols, believing that they violate the individual rights of U.S. citizens by allowing foreign governments to sift through the personal records of Americans.

Paul is at an impasse with the U.S. Treasury, who have stopped talks abruptly as Paul stands for the rights of Americans.

“We’ve been trying to achieve a compromise with Treasury and negotiations were very close to an agreement, and [then] Treasury broke off the negotiations,” Paul said to Tax Notes yesterday.

GOP lobbyists are saying that the Senate is prepared to move forward with the treaties and protocols despite Paul’s objections.

Four protocols (Spain, Switzerland, Luxembourg, and Japan) and three treaties (Hungary, Chile, and Poland) are currently active in the Senate. None have been passed since Paul entered the Senate, but Senate Republican leaders want to proceed quickly on approving them.

Paul is holding things up because he wants “to protect the privacy of individuals so that foreign governments” cannot sift through the records of U.S. citizens. An anonymous lobbyist told Tax Notes that affording U.S. citizens their basic constitutional rights is untenable.

“He is asking for something that goes against U.S. policy and international tax policy on treaties,” the lobbyist said.

As usual, Senate Majority Leader Mitch McConnell (R-KY) is reportedly in the pocket of the lobbyists and “is willing to bring the treaties and protocols to the floor and file cloture in a way to overcome Senator Paul’s objections.”

The American Institute of CPAs (AICPA) is one of the powerful organizations representing corporate interests that want the Senate to approve these treaties and protocols in an expedited fashion. The organization has appealed to Senate Foreign Relations Committee Chair James E. Risch (R-ID) and ranking member Robert Menendez (D-NJ) to move quickly on these matters.

“Tax treaties assist in harmonizing the tax systems of treaty nations and in providing certainty on key issues faced by businesses of all sizes that operate internationally,” a letter endorsed by AICPA Tax Executive Committee Chair Christopher Hesse stated.

The Senate Foreign Relations Committee will have to approve the treaties and protocols before they can hit the Senate floor. Paul’s objections will force them to be approved sequentially, instead of approved in bulk by unanimous consent.

While Paul may ultimately be overruled, his stand for individual rights on this issue will force added deliberation and put more eyes on these treaties and protocols that may harm individual liberty at the behest of multinationals.