By Frank J. Dmuchowski
(June 13, 2013)
The following is a summary of some of the key points which I presented on the KPA segment of the Polish Varieties Program on May 18, 2013 and in an expanded article in the May 29, 2013 issue of Tygodnik Polski. It is important to note that the 2013 Tax Treaty is available in English and Polish on the Polish American Congress National website. Into your browser simply type “pac1944.org” and you will be able to access all of the information.
First— The 2013 Tax Treaty was signed on February 13, 2013 in Warsaw. It is important to note that the treaty does not take effect until it is ratified by the United States Senate and the appropriate body in Poland. This means that it is the 1974 Tax Treaty that is still in effect.
Second — None of my comments are intended as tax advice. It is wise to contact a competent tax attorney familiar with international tax issues for any of your tax decisions.
Third —why the 2013 Tax Treaty is not likely to be ratified very soon!! (Very Important) An American version of the Liberum Veto
This is not an anti-Polish action.
This treaty is not likely to go before the United States Senate very soon for ratification because of a procedural blocking measure that has been used by Senator Rand Paul, Republican from Kentucky. This is not an anti-Polish issue. Since 2011 Senator Paul has been blocking a number of previous treaties because of his concern that the American government will end up sharing information with foreign countries about American citizens which it should not. The treaties blocked from ratification include Switzerland, Hungary and Luxembourg. Added to the list of block treaties will most likely be countries such as Japan, Great Britain, Chile, and Spain. Norway and of course Poland.
The Tax Treaty if passed in its current format could allow the possible sharing of this information in the name of “preventing evasion of taxes on income.”
Senator Paul concerns were further heightening with the recent release of information that the Internal Revenue Service has been targeting certain ‘conservative groups” for special attention. One of these groups is the Tea Party which is a major support basis for Senator Rand.
To make matters even more difficult we have the recent release in June that NSA (National Security Agency has been gathering information on the overseas phone calls and internet correspondence of Americans without probable cause. All of this is being done in the name of national security. Senator Paul wrote an op-ed piece for the June 11, Wall Street Journal in which he states “monitoring hundreds of millions of phone records is an extraordinary invasion of privacy”
Senator Paul has taken his position in the face of strong opposition from business groups that want the treaty passed.
Before this new information by the NSA became public I was estimating that Senator Paul l would not release any of the tax treaties for a before 2015 at the earliest. The delay becomes even more certain!!
Fourth—the treaty does have language in it to eliminate double taxation. However the key is how this language is implemented by the IRS (Internal Revenue Service) and the Polish Tax Authorities. It is important to note that because double taxation is eliminated it does not mean that taxes will be zero. Taxes will have to be paid. The question is to whom and how much.
The actual wording can be found in Article 18 of the treaty which is titled “Pensions, Social Security, Annuities, Alimony and Child Support”
Fifth — New Polish American Congress Committee to look into the 2013 Tax Treaty
There has been some concern regarding the language in the treaty. This was primarily expressed by members of the Long Island Division. After discussion the National Directors at the May 2013 meeting decide to create a committee reporting to the National Executive Committee–which is chaired by Mr. Frank Spula– to look into the issues that have emerged because of the treaty language. The creation of this committee was approved overwhelmingly with only one abstention. The committee will be headed up by Zygmunt Staszewski who is the Secretary for the Long Island Division.
Sixth— This tax treaty is becoming a political hot potato in Poland. It is increasingly viewed “that Poland has given up to much to the United States”. If the 2013 Tax Treaty is not ratified before the next elections in Poland it could become a central part of their political debate. This will be particularly significant if the United States is seen as taking Poland and Poles for granted. Here we can see a potential tie-in with the Visa Waiver Program.
Seventh– Let me close by repeating that the 2013 Tax Treaty does not go into effect until it is ratified by the United States Senate and appropriate group in Poland. Because of recent concerns on “information privacy” in the United States the treaty is not likely to be available for a ratification vote very soon. This is not anti-Polish as a number of similar treaties are being held up for the same reason.
While the treaty eliminates “double taxation” it does not eliminate some form of taxes being paid. It is always good to talk to a knowledgeable tax consultant on this issue.