Thomas Donohue's article "Time to update the U.S.-Japan tax treaty" (The Japan Times, July 19) misleads readers about the issues in the Japan-U.S. tax treaty. The issues are more complex than he indicates.

Informal discussions between Japanese and U.S. tax authorities are currently in progress regarding various issues relating to the Japan-U.S. tax treaty. There remain, however, substantial gaps between the positions taken by the two governments, making it too difficult to set a timetable for formal negotiations.

Tax treaties have several general functions, including clarification of applicable rules relating to international tax affairs, avoidance of international double taxation, and facilitating the exchange of goods and services and the movement of capital, technology and persons. Tax treaties also provide for the reasonable allocation of the tax base between two sovereign states. In tax treaty negotiations, all these considerations -- and the often conflicting interests of both parties -- must be taken into account, thereby ensuring a well-balanced coordination of the taxation rights of the two sovereign nations. Certainly, what matters most is the treaty's achievements, not its age.