ANCA STRESSES NEED FOR U.S.-ARMENIA TREATY TO PREVENT DOUBLE TAXATION

Bilateral Accord would Promote Trade, Facilitate Investment, Spur Job-Creation

August 9, 2011

WASHINGTON, DC – A new U.S.-Armenia treaty reducing the threat of double taxation would, by removing a major barrier to bilateral trade and investment, strengthen the economic relationship between the U.S. and Armenian governments and also the enduring bonds of friendship between the American and Armenian peoples, according to a recent letter from the Armenian National Committee of America (ANCA) to Secretary of the Treasury, Timothy Geithner.

In a two-page August 5, 2011 letter, ANCA Chairman Ken Hachikan explained that this urgently needed and long-overdue Double Tax Treaty “would create a clear framework for investors and individuals that have business activities or own and manage a property or any other taxable asset in both jurisdictions. It would prevent many tax disputes from arising, and provide clear avenues for tax dispute settlement.” He also stressed that the absence of an existing and operational agreement, “seriously and substantially impacts the quality and quantity of commerce between the U.S. and Armenia,” noting, in particular, that: “The lack of clarity that results from the absence of this treaty forces potential investors to add an element of uncertainty, potential costs, and new risks into their business calculations. This uncertainty represents a material, often decisive, deterrent for potential U.S. investors in Armenia.”

Hachikian stressed that: “Very simply, the lack of a U.S.-Armenia Double Tax Treaty makes Armenia a less attractive place for American corporations to invest, while, at the same time, its absence makes the U.S. less attractive for Armenian companies doing business abroad.” He added that: “Armenia’s neighbor, Turkey, has a Double Tax Treaty, as do Russia, Ukraine, and all the Baltic states: Estonia, Latvia, and Lithuania. Israel, Ireland, Italy, Greece, and other countries with large diasporan communities in the United States also have such accords in place, yet Armenia does not.”

The ANCA first advocated a Double Tax Treaty as early as 2004, and has long been on record encouraging the White House to put in place a U.S.-Armenia Trade and Investment Framework Agreement. The full text of the ANCA letter is provided below.

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August 5, 2011

The Honorable Timothy Geithner
Secretary of the Treasury
U.S. Department of the Treasury
Main Treasury, Room 3330
1500 Pennsylvania Ave., N.W.
Washington, D.C. 20220

Dear Secretary Geithner:

I am writing, on behalf of one and a half million Americans of Armenian heritage, many of whom have business and investment ties to Armenia, to request an opportunity to meet with you to discuss a Double Tax Treaty between our government and the Republic of Armenia.

We seek this meeting in the spirit of President Obama’s campaign pledge 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, but, nearly three years into this Administration, have not yet seen a concrete expression of the President’s stated interest in materially promoting bilateral trade and investment.

As you know, Armenia has received Permanent Normal Trade Relations status and is a member in good standing of the World Trade Organization. Armenia’s progress in establishing a modern, market-oriented economy, in the face of blockades by Turkey and Azerbaijan, has been praised by the Wall Street Journal/Heritage Foundation Index of Economic Freedom, which rates Armenia as among the freest economies among the states of the former Soviet Union. Armenia is a partner and ally of the United States, having sent troops as part of Coalition operations in Iraq, deployed peace-keepers to Kosovo, and, most recently, tripling its force level in Afghanistan.

Despite Armenia’s progress and the President’s strong statements, there has been essentially no meaningful U.S. movement at all on a Double Tax Treaty, even though the discussion of such an accord has long been on the agenda of the U.S.-Armenia Joint Economic Task Force. For our part, the ANCA has been on record calling upon the Department of the Treasury to negotiate this treaty since 2004.

This urgently needed and long-overdue treaty would create a clear framework for investors and individuals that have business activities or own and manage a property or any other taxable asset in both jurisdictions. It would prevent many tax disputes from arising, and provide clear avenues for tax dispute settlement.

The absence of an existing and operational Double Tax Treaty seriously and substantially impacts the quality and quantity of commerce between the U.S. and Armenia. The lack of clarity that results from the absence of this treaty forces potential investors to add an element of uncertainty, potential costs, and new risks into their business calculations. This uncertainty represents a material, often decisive, deterrent for potential U.S. investors in Armenia. American investors, particularly larger ones, are accustomed to the predictability of established tax regimes, and, quite naturally, are troubled by the possibility that the lack of a tax treaty might potentially expose them to civil or even criminal liability.

Very simply, the lack of a U.S.-Armenia Double Tax Treaty makes Armenia a less attractive place for American corporations to invest, while, at the same time, its absence makes the U.S. less attractive for Armenian companies doing business abroad. Armenia’s neighbor, Turkey, has a Double Tax Treaty, as do Russia, Ukraine, and all the Baltic states: Estonia, Latvia, and Lithuania. Israel, Ireland, Italy, Greece, and other countries with large diasporan communities in the United States also have such accords in place, yet Armenia does not.

In closing, I would like to underscore that the negotiation of a Double Tax Treaty, in addition to bringing about mutual material benefits to two friendly nations, would also strengthen the enduring bonds between the American and Armenian peoples.

I look forward to hearing from your office regarding this request, and to discussing with you how we can realize the President’s vision for stronger U.S.-Armenia commercial ties.

Sincerely,

Kenneth V. Hachikian
Chairman