Excerpt from Prepared Statement of H. Patrick Oglesby, Foreign Tax Counsel, Alan L. Fischl, Legislation Attorney, and Stephen M. Parks, Accountant, Staff of the Joint Committee on Taxation: Hearing on Proposed Tax Treaty With Bermuda Before the Senate Committee on Foreign Relations, September 25, 1986

You have before you the Treasury Department's technical explanation of the proposed treaty, which describes the treaty's features in detail. We will not repeat such a description in this presentation. Instead, we would like to focus our discussion on the tax policy issues presented by the proposed treaty. We recognize that there are important non-tax factors as well that the Committee will consider in connection with the proposed treaty, including issues relating to national security and trade. Our exclusive focus on the tax issues raised by the treaty should not be construed as reflecting any judgment on our part about the relative weight that should be placed on tax and non-tax factors in reviewing the treaty.

The treaty does raise several significant tax policy issues which we analyze below in separate sections. The nature of these issues is such that, were the treaty to be considered from a pure tax policy standpoint, we would probably recommend that the Committee not recommend Senate approval. As indicated above, however, we recognize that there are unique non-tax factors that the Committee will take into account in deciding what action to recommend on the proposed treaty: how the tax and non-tax factors are to be weighed is obviously a question left to your judgment. If the Committee decides to recommend approval of the treaty, the Committee may wish to consider including in its report a statement that, due to the unique nature of the treaty, it is not intended to serve as a precedent for future tax treaty negotiations. As detailed below, the treaty departs in several respects from established principles of treaty policy. If it were considered to have a precedential value from a tax policy perspective, such a judgment would have major consequences for basic notions of what tax results tax treaties are intended to achieve.

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