Congressional Unilateral Tax Treaty Overrides: The "Latter in Time Doctrine" Is Out of Time!'

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Florida Tax Review


The current form of globalization has resulted in greater global economic integration and liberalization, political openness, and cultural and social acceptance. As the world economy continues to weaken national economic orders, and as nations become more dependent upon international trade, good relations between nations may provide greater global wealth and political stability. Global integration requires a "cooperative multilateralist" approach, encouraging international alliances, partnerships and institutions. The current global shift, however, finds the United States in a period of protectionism. As a result of 9/11, the United States has begun a strategy of preemption, one triggered at creating measures aimed at preventing substantial casualties to the U.S., whether military or economic. The actions taken in furtherance of this strategy, such as the invasion of Iraq without the consent of the Security Council, altered the perception of the United States around the world. Furthermore, these actions were in direct contradiction of Secretary of State Condoleezza Rice's pledge to "support and uphold the system of international rules and treaties that allow us to take advantage of our freedom." International tax treaties are a vital instrument in developing and stimulating economies throughout the world.' Countries enter into tax treaties to promote investment, growth, and commerce by avoiding double taxation and preventing tax evasion. Unilateral actions, such as Congress amending the tax code to override an international tax treaty, bear significant negative impacts upon the potential development of economies and the political relationship between the nations. Congress' ability to override these treaties negates the "anti-imperial" design of the Constitution and creates negative consequences for economic development and commerce. In spite of this, treaties are often partially or completely abrogated in a unilateral fashion. It is vital for the United States to adhere to treaties into which it enters and pay heed to the reliance of other nations on these treaties. The United States "retains more capacity than any other actor to improve the quality of the international system, so the question is whether it will continue to possess such capacity."" The determination of this question appears to depend on how the nation develops its' international relations under the new leadership of President Barack Obama. President Obama believes "it is illegal and unwise for the President to disregard international human rights treaties that have been ratified by the United States Senate," yet, the question remains whether he feels the same about overriding international tax treaties. President Obama stated the United States is in need of repairing relationships with other nations, whereby strengthening its economic alliances and garnering the support for the United States to compete on a global scale.' Due to President Obama's overwhelming dedication to international policy," it seems inevitable the question will be answered sooner than expected, especially considering the historic lack of urgency to address this matter. This article examines the questionable jurisprudence allowing the United States to override treaties unilaterally, freely negotiated between two sovereign nations, through the later-in-time doctrine. Through the perspective of tax conventions, this article provides an overview of the historical development and context of unilateral treaty overrides. The following analysis will demonstrate the flawed reasoning behind the enactment of the later-in-time doctrine; the necessity to distinguish between Indian and sovereign nations; the contravention of the executive branch's treaty powers; the flawed interpretations of the Supremacy Clause; and the growing requirement to fulfill international obligations. The analysis provides a plausible solution by applying a heightened scrutiny to domestic tax statutes attempting to override prior-in-time treaties. The call for heightened scrutiny is to be applied before potential overrides are granted; it is not meant to displace Congress' power to override international tax treaties by way of the tax code. In the case that an override is allowed, the void left from the unfulfilled obligations should spur the United States to make restitution to the parties injured.

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