Article 23 of the new Convention — U.S. Income Tax Treaty

unavailable to persons engaged in treaty-shopping. The current convention contains no such anti-treatyshopping rules. The Limitation on Benefits of the proposed Convention also eliminates another potential abuse by denying U.S. benefits with respect to income attributable to third-country permanent establishments of Irish corporations that are exempt from tax in Ireland by operation of Irish law (the so-called "triangular cases"). Under the new Convention, full U.S. treaty benefits generally will be granted in these triangular cases only when the U.S. source income is subject to a significant level of tax in Ireland or in the country in which the permanent establishment is located.

The proposed Convention also contains rules necessary for its administration, including rules for the resolution of disputes under the Convention (Article 26) and for exchange of information (Article 27).

The Convention would permit the General Accounting Office and the tax-writing committees of Congress to obtain access to certain tax information exchanged under the Convention for use in their oversight of the administration of U.S. tax laws.

This Convention is subject to ratification. In accordance with Article 29, it will enter into force upon the exchange of instruments of ratification and will have effect for payments made or credited on or after the first day of January following entry into force with respect to taxes withheld by the source country; with respect to other taxes, the Convention will take effect for taxable periods beginning on or after the first day of January following the date on which the Convention enters into force. When the present convention affords a more favorable result for a taxpayer than the proposed Convention, the provisions of the present convention will continue to apply for one additional year. Article 29 (5) also provides that

certain companies that are owned by residents of member states of the European Union or of parties to the North American Free Trade Agreement not be subject to the terms of Article 23 (5) (b) for an additional two years.

The proposed Convention will remain in force indefinitely unless terminated by one of the Contracting States, pursuant to Article 30. That Article provides that, at any time after five years from the date the Convention enters into force, either State may terminate the Convention by giving prior notice through diplomatic channels of six months.

A Protocol and an exchange of notes accompany the Convention and provide binding interpretations and understandings concerning the application of the Convention. The Protocol, which states that it is an integral part of the Convention, elaborates on the meaning of certain terms used in the Convention. The exchange of notes provides further clarification and will constitute an agreement that will enter into force upon entry into force of the Convention.

A technical memorandum explaining in detail the provisions of the Convention will be prepared by the Department of the Treasury and will be submitted separately to the Senate Committee on Foreign Relations.

The Department of the Treasury and the Department of State cooperated in the negotiation of the Convention. It has the full approval of both Departments.

Respectfully submitted,

MADELEINE ALBRIGHT.

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 24, 1997. To the Senate of the United States:

I transmit herewith for Senate advice and consent to ratification the Convention Between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, signed at Dublin on July 28, 1997, (the "Convention") together with a Protocol and an exchange of notes done on the same date. Also transmitted is the report of the Department of State concerning the Convention.

This Convention, which is similar to tax treaties between the United States and other OECD nations, provides maximum rates of tax to be applied to various types of income and protection from double taxation of income. The Convention also provides for resolution of disputes and sets forth rules making its benefits unavailable to residents that are engaged in treaty shopping.

I recommend that the Senate give early and favorable consideration to this Convention, with its Protocol and exchange of notes, and that the Senate give its advice and consent to ratification.

WILLIAM J. CLINTON.

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

AND CAPITAL GAINS

The Government of the United States of America and the Government of Ireland, desiring to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains have agreed as follows: