Article 18 of the proposed Convention contains significant anti-treaty-shopping rules…

Convention's benefits unavailable to persons engaged in treaty shopping.

The proposed Convention also contains the standard rules necessary for administering the Convention, including rules for the resolution of disputes under the Convention (Article 27). The information-exchange provisions of the proposed Convention (Article 28) make clear that Thailand is obligated to provide U.S. tax officials such information as is necessary to carry out the provisions of the Convention. Under this provision, Thailand will provide tax information in a manner consistent with U.S. policy, including bank information, to the United States whenever there is a "Thai tax interest" in the case. While Thailand may not provide information under this Convention where there is no "Thai tax interest," U.S. tax authorities will be given access to information in criminal cases, including tax fraud, regardless of whether there is a "Thai tax interest," under the provisions of the existing Mutual Legal Assistance Treaty between the United States of America and the Kingdom of Thailand. Thus, the United States will be able to obtain information in criminal, but not civil, cases where there is no "Thai tax interest."

The proposed Convention contains an unusual termination provision designed to deal with the "tax interest" problem. The proposed Convention provides that Thailand generally is required to treat a U.S. tax interest as a "'Thai tax interest" in all cases, including both civil and criminal tax proceedings. However, this general provision will not be in effect until the United States receives from Thailand a diplomatic note indicating that Thailand is both prepared and able to implement this provision, which will not be possible until Thai law is changed. If the United States has not received such a diplomatic note by June 30 of the fifth year following entry into force of the Convention, the entire Convention will terminate on January 1 of the sixth year following its entry into force (Article 31, Paragraph 2).

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 and treaties (Article 28).

This Convention is subject to ratification. In accordance with Article 30, it will enter into force upon the exchange of instruments of ratification with respect to taxes withheld by the source country and will have effect for payments made or credited on or after the first day of the sixth month following entry into force; with respect to other taxes, it will take effect for taxable years beginning on or after the first day of January following the date on which the Convention enters into force.

If the proposed Convention does not terminate on January 1 of the sixth year following its entry into force, it will remain in force indefinitely. After five years from the date the proposed Convention enters into force, either State may terminate the Convention pursuant to Article 31 by giving at least six months of prior notice through diplomatic channels.

Diplomatic notes exchanged between the parties accompany the Convention and provide clarification with respect to the application of the Convention in specified cases.

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,

WARREN CHRISTOPHER.

Enclosures as stated.

LETTER OF TRANSMITTAL

THE WHITE HOUSE, January 28, 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 the Kingdom of Thailand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Bangkok, November 26, 1996. An enclosed exchange of notes, transmitted for the information of the Senate, provides clarification with respect to the application of the Convention in specified cases. Also transmitted is the report of the Department of State concerning the Convention.

This Convention, which is similar to other tax treaties between the United States and developing 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 the exchange of information to prevent fiscal evasion and sets forth standard rules to limit the benefits of the Convention to persons that are not engaged in treaty shopping.

I recommend that the Senate give early and favorable consideration to this Convention and give its advice and consent to ratification.

WILLIAM J. CLINTON.

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE KINGDOM OF THAILAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL

EVASION WITH RESPECT TO TAXES ON INCOME

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