U.S. Multinationals Lobby to Alter Tax Rules They Sought
By Richard Rubin - Jun 4, 2012 12:00 AM ET
U.S. multinational companies have been seeking a tax break on overseas income for years, and the top Republican tax writer in Congress is proposing to give it to them. There’s a catch they don’t like.
Businesses and trade groups are lobbying House Ways and Means Committee Chairman Dave Camp to loosen rules in his draft plan that would make it harder for companies to shift income from the U.S. to lower-taxed foreign countries. Among those groups is the National Foreign Trade Council, whose board includes officials of Oracle Corp. (ORCL), Pfizer Inc. (PFE) and PepsiCo Inc. (PEP)
“It’s a good-faith effort, but we are a long way from developing a package that everyone can sign on to,” said Catherine Schultz, vice president for tax policy at the trade group, which advocates expanded international commerce. “You would not get a lot of the business community supporting this if this was a final draft.”
The debate over foreign income is a preview of just how hard a tax overhaul, which both political parties say they want, is going to be. While many -- though not all -- companies know they don’t like what Camp proposes, they don’t agree among themselves about how to fix it. What some call fair others see as unjustified, depending on what line of business they are in and how their global operations are organized.
Some companies “want it all and want it now,” said Camp, comparing them to a spoiled rich kid.
In many cases, tighter rules on moving income to low-tax countries such as Bermuda would offset much of the gain from the exemption Camp is proposing.
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President Obama
President Barack Obama contends the tax code already provides incentives to move business offshore. He wants to deny tax deductions for the cost of moving production abroad and make it harder for companies to defer U.S. taxes on overseas income.
“It still makes no sense for us to be giving tax breaks to companies that are shipping jobs and factories overseas,” the president said May 30.
The plan offered by Camp, a Michigan Republican, assumes the corporate tax rate will drop to 25 percent from 35 percent, and it would give companies a 95 percent exemption on their foreign income. The plan has three options to keep companies from eroding the U.S. tax base by shifting income overseas, and that’s what has prompted much of the business resistance.
“The base-erosion provisions have not been particularly popular,” said Pamela Olson, deputy tax leader at PricewaterhouseCoopers LLP in Washington. Companies are trying to come up with an alternate proposal though it is a “tortuous path,” she said.
more:
http://www.bloomberg.com/news/2012-06-04/u-s-multinationals-lobby-to-alter-tax-rules-they-sought.html
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