Ian K. Sugarman


This Comment examines the fruition of the U.S. Treasury Department's efforts to forestall third-country residents' avoidance of U.S. taxation on transatlantic investments through intermediary companies. Part I sets forth multinational corporations' penchant for interposing entities in the Netherlands and the multifarious endeavors implemented to curb abusive treaty practices. Part I also discusses the unilateral legislative provisions that expedited, and the bilateral tax treaty provision that shaped, the U.S.-Dutch negotiations. Part II describes the detailed requirements enumerated in the extensive limitation on benefits provision of the U.S.-Netherlands Treaty. Part III argues that Article 26 strengthens the international community's commitment to effecting tax treaties and serves to rightfully compel treaty shoppers to relinquish propitious tax treatment, while ensuring treaty benefits to bona fide residents of the Netherlands. Part III also contends that the Convention escapes contravention of European unification and provides U.S. negotiators with an opportunity to forge an authoritative tax treaty policy. This Comment concludes that the revolutionary bilateral accord effectuates future U.S. tax conventions, sustains the U.S. tax base, and severely hinders the use of Dutch holding companies as investment vehicles for the procurement of benefits under the U.S.-Netherlands Treaty.