U.S. Multinationals Lobby to Alter Tax Rules They Sought
By Richard Rubin - 2012-06-04T15:42:51Z
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. Theres a catch they dont 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 more difficult for companies to shift income from the U.S. to lower-taxed 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)
Its 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 how difficult a tax overhaul, which both political parties say they want, is going to be. While many -- though not all -- companies know they dont like what Camp proposes, they dont agree about how to fix it. What some companies call fair others see as unjustified, depending on what line of business they are in and how their global operations are organized.
There are a few Veruca Salts who want it all and want it now, said Camp, comparing a minority of companies to the fictional spoiled rich kid from the book and movie Charlie and the Chocolate Factory.
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.
U.S. multinational companies, including Google Inc., Cisco Systems Inc., and Forest Laboratories Inc., save billions of dollars in taxes annually by shifting profits into subsidiaries in tax havens, often using techniques with nicknames like double Irish and Dutch sandwich.
Under current law, U.S. companies owe the 35 percent U.S. corporate tax rate on all the income they earn around the world. They get credits for tax payments to foreign governments, and they dont pay the U.S. anything until they bring the money home.
Camp, the U.S. Chamber of Commerce and Republican presidential candidate Mitt Romney say the U.S. tax system makes it harder for American companies to compete internationally with businesses from the U.K., Germany and Japan whose home countries dont impose additional taxes on foreign profits.
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U.S. Multinationals Lobby to Alter Tax Rules They Sought