ANCA Asks Treasury Department To Revisit U.S.-Armenia Tax Treaty

Treasury Secretary Jack Lew

Letter Calls on Secretary Lew to Remove Obstacles to Expanded American Investment

WASHINGTON—Armenian National Committee of America Chairman Ken Hachikian asked newly sworn-in Secretary of the Treasury Jacob Lew this week to revisit the Obama Administration’s past reluctance to negotiate a new U.S.-Armenia Double Tax Treaty aimed at facilitating increased bilateral trade and investment.

In a March 27 letter, Hachikian restated the ANCA’s longstanding view that the 1973 U.S.-U.S.S.R. Tax Treaty is clearly insufficient to the needs of the present-day U.S. economic relationship with Armenia, and reaffirmed the organization’s position that a new treaty would substantially ease potential burdens upon potential investors.  “The present situation’s lack of clarity, resulting, as it does, in uncertainty, potential costs, and new risks, represents a substantial deterrent for potential U.S. investors,” explained Hachikian.  “Without an updated Tax Treaty, U.S. businesses will continue to face significant burdens on investment and cross-border services and payments, as well as a lack of transparent information exchange and obstacles to cooperation on tax and related matters.”

Parallel to efforts with the Department of Treasury in support of a Double Tax Treaty, the ANCA is also working to encourage pro-active U.S. leadership across a broad array of economy-related platforms, including the U.S.-Armenia Joint Economic Task Force, and a potential Trade and Investment Framework Agreement (TIFA), Social Security Agreement, future trade missions, and business visa relaxation.

Last month, representatives of the Department of State, the Armenian Embassy, and the Armenian American community shared views and explored practical paths toward expanded U.S.-Armenia bilateral trade and investment at a roundtable talk hosted by the ANCA.  The town-hall format meeting, held in the Aramian Conference Room of the ANCA’s Washington headquarters, included participation by State Department Director of the Office of Caucasus Affairs and Regional Conflicts Justin Friedman, ANCA Trade and Investment Policy Specialist Nora Khanarian, Ph.D., Embassy of the Republic of Armenia Counselor Andranik Hovhannisyan, Ph.D., and ANCA Executive Director Aram Hamparian.  Watch the complete video from the event.

Read an ANCA Fact Sheet on U.S.-Armenia trade.

The full text of the ANCA letter is provided below.

March 27, 2013

The Honorable Jacob J. Lew
Secretary of the Treasury
U.S. Department of the Treasury, Room 3330
1500 Pennsylvania Ave., N.W.
Washington, D.C. 20220

Dear Secretary Lew:

I am writing, on behalf of the Armenian American community, to congratulate you on becoming our nation’s 76th Secretary of the Treasury, and to raise with you a matter of considerable concern to all Americans interested in the growth of U.S.-Armenia economic relations.

As you know, President Obama entered the White House having pledged to “help foster Armenia’s growth and development through expanded trade and targeted aid, and by strengthening the commercial, political, military, developmental, and cultural relationships between the U.S. and Armenian governments.”  We warmly welcomed this commitment and remain eager to work with the Administration in translating this promise into policies and programs.  We are particularly encouraged in this regard by Armenia’s strong record of economic reform, and its partnership with our government on military operations in Iraq, Kosovo, and Afghanistan.

It is our understanding that, in connection to the annual meeting of the U.S.-Armenia Joint Economic Task Force held in October of 2012, the Department of Treasury informed the Republic of Armenia’s Ministry of Finance of the U.S. government’s view that there is no basis upon which to consider initiating tax treaty negotiations with Armenia.  We remain troubled by this response and are, today, writing to ask the Department of Treasury to revisit this matter and move forward, for the benefit of both nations, on an updated U.S.-Armenia Double Tax Treaty.

The Republic of Armenia has repeatedly asked for a new agreement to replace the 1973 U.S.-U.S.S.R. Tax Treaty.  This outdated, forty year-old accord, which Yerevan, it would appear, no longer considers in force, was intended as a limited agreement, even by the standards of the 1970s, between two hostile superpowers. It is clearly insufficient to the needs of our present-day economic relationship with Armenia. The present situation’s lack of clarity, resulting, as it does, in uncertainty, potential costs, and new risks, represents a substantial deterrent for potential U.S. investors.  Without an updated Tax Treaty, U.S. businesses will continue to face significant burdens on investment and cross-border services and payments, as well as a lack of transparent information exchange and obstacles to cooperation on tax and related matters.

While we understand that negotiating tax treaties requires time and other resources, the process of negotiating a treaty between the U.S.-Armenia treaty should be very straight-forward and would likely largely follow the U.S. Model Income Tax Convention of 2006, updated by more recent features of U.S. tax treaty policy such as provisions for mandatory arbitration.  Armenia has broad experience in negotiating tax treaties – it now has in effect some 34 bilateral income tax treaties, all negotiated since the dissolution of the U.S.S.R., including most recently a treaty with the United Kingdom that largely follows the O.E.C.D. Model Convention.  Other Armenian tax treaties include those with Austria, Belgium, Canada, China, France, Italy, the Netherlands, Poland, and Russia.

The negotiation of an updated Double Tax Treaty is urgently needed and long-overdue to create a clear framework for investors and individuals that have business activities in both jurisdictions.  Just as the U.S. has negotiated tax treaties with Estonia, Slovenia, Lithuania, and Malta, a treaty with Armenia would bring material benefits in terms of our economic relations with a friendly emerging market.

We appreciate your attention to our concerns and would welcome the opportunity to continue our dialogue with the Department by meeting with you to discuss this matter in greater detail.

Sincerely,
[signed]
Kenneth V. Hachikian
Chairman

cc:  Members of the U.S. Congress

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