Based on privacy concerns Senator is opposing the ratification of some US tax treaties including the Hungary – United States Income Tax Treaty (2010). The Senator is particularly concerned that the US government would be permitted by the treaty to obtain various records without needing to present any evidence that a taxpayer was trying to evade taxes. Owing to this delay ratification of the new treaty is delayed and the current treaty with Hungary will remain in force.
The Senator was previously involved in advocating amendments to the US FATCA legislation owing to privacy issues and is now concerned that the exchange of information provisions in the tax treaties with Hungary and some other countries will be used as a means of obtaining information in connection with FATCA.
The US government did not immediately respond to the letter from the Senator. The administration has however previously expressed the view that it is a principle of international standards for information exchange on request that the country receiving the tax information will adhere to standards of confidentiality and use that information only for the purposes of legitimate tax administration.
Under the provisions of the current US-Hungary tax treaty, Hungarian residents may claim reduced or nil withholding taxes on US sourced interest and royalties. For dividends from the US the withholding tax may be restricted to 5% subject to certain conditions. The current treaty does not contain a Limitation on Benefits article, but an article is included in the new treaty.
