US-Armenia tax treaty
BY RAFFI HAMPARIAN
Remember in 1973 when the Soviets, under Leonid Brezhnev, and the Americans, during Richard Nixon’s presidency, signed a tax treaty?
That’s OK. Neither do I.
That was decades ago. A different time. A very different world.
The Union of Soviet Socialist Republics, our enemy back then, hasn’t existed for a quarter century.
And Armenia, now a free state, is a close friend of the United States.
This old accord – formally known as the Convention between the United States of America and the Union of Soviet Socialist Republics on Matters of Taxation – was outdated the day it was signed (June 20, 1973) by two antagonistic powers, and is clearly no basis for modern day U.S.-Armenia economic cooperation in 2016. In fact, as a matter of international law, Armenia does not even consider itself the legal heir to Moscow’s signature on this antiquated treaty.
And yet, the Obama Administration and its Treasury Department somehow think that this treaty is sufficient to prevent the double taxation of profits generated by the growing number of U.S. and Armenian firms operating in both of these jurisdictions.
It is a sad state of affairs to have the threat of double taxation hanging above each and every bilateral commercial transaction. Business leaders, instead of focusing on creating jobs in the United States and Armenia, are forced to spend time navigating an uncertain taxation environment, meaningfully limiting the scope and depth of their deals to avoid double taxation. Even worse, countless potential companies considering U.S.-Armenia business investments are deterred by the prospect of paying taxes twice on the same earnings. These are the investments that never get made, the trade deals never negotiated, the offices and factories never opened. This is the massive hidden cost of failing to eliminate – via a simple, straightforward treaty – a major barrier to the growth of bilateral commerce. This, very simply, is the price we all pay for indifference on this key economic front.
The case for a double tax agreement between the United States and Armenia is as clear as it is compelling. America has taxation treaties with dozens of countries for good reason, including those with a number of smaller economies. U.S. policymakers know that these treaties are, in a mutually beneficial way, good for both American businesses and workers. Armenia, for its part, has double tax treaties with many nations, including large economies such as the United Kingdom and India. In fact, in June of this year, Armenia signed its latest tax treaty with Germany.
The United Nations Department of Economic and Social Affairs spelled out the rationale for international double tax treaties in a 2011 document: “The growth of investment flows between countries depends to a large extent on the prevailing investment climate. The prevention or elimination of international double taxation in respect of the same income – the effects of which are harmful to the exchange of goods and services and to the movement of capital and persons, constitutes a significant component of such a climate.â€
