House Ways and Means Committee Chairman Dave Camp’s proposed rewrite of the U.S. approach to international taxation will require multinational companies to decide whether to continue a push for a repatriation holiday or wait for a broad overhaul of the tax code.
Draft legislation that Camp, a Michigan Republican, released yesterday would create a territorial system of taxation, in which the U.S. would only tax domestically generated income. The proposal sets up a tax system in which companies wouldn’t lobby again for a temporary tax holiday because their overseas earnings would be out of reach of U.S. tax authorities.
The proposal is the first piece of a comprehensive U.S. tax code rewrite that Camp intends to unveil over an uncertain timeline. Meanwhile, Representative Kevin Brady, a Texas Republican, is trying to advance a bill establishing a temporary tax holiday that would let companies return offshore profits to the U.S. at a 5.25 percent rate.
A coalition of multinational companies and business groups pressing for the one-time holiday, which includes Pfizer Inc. (PFE) and Cisco Systems Inc. (CSCO), have offered support for both proposals. Brady said the “clock is ticking” for companies to decide what to do with the more than $1 trillion in profits they are holding overseas.
“Our companies are facing tremendous pressure to deploy those stranded profits now,” he said in a brief interview yesterday. “Businesses are going to have to give some thought on what price they’ll pay for a permanent territorial system.”
‘Long-Term Fix’
Camp said he doesn’t view his proposal as being “at cross purposes” with Brady’s legislation establishing a tax holiday. Still, Camp would prefer to resolve the fate of offshore profits once and for all, he said.
“I do believe we want a long-term fix,” he told reporters yesterday. “The goal of this legislation is to have a permanent change.”
Camp’s territorial tax proposal includes a so-called deemed repatriation provision that doesn’t require companies to return offshore profits to the U.S. They would have to pay tax at a 5.25 percent rate as if they had returned the profits. Once they pay the levy, companies can bring the money home 95 percent tax- free.
Other Republicans on the tax-writing Ways and Means committee, including Representative Tom Price of Georgia, said they would support the permanent plan Camp is proposing.
Must Be Permanent
“It has to be permanent,” Price said in an interview. “One of the huge challenges that we’ve got right now is the uncertainty in the economy. If this is just a one-time thing, that’s better than where we are right now, but it doesn’t provide the certainty that’s needed.”
Bloomberg News reported last month that more than 160 lobbyists -- many of them former Hill staffers -- are representing companies and business groups that support a one- time tax holiday.
With that kind of investment, multinational companies aren’t likely to back off their support for a temporary repatriation measure, said Dan Smith, the tax and budget associate for the U.S. Public Interest Research Group, a Washington-based consumer advocacy group.
“I don’t think Camp’s proposal will make the corporations call off the dogs,” he said.
Karen Olick, campaign manager for the WIN America coalition, which is representing the multinational companies seeking the holiday, said the organization would “closely” review Camp’s proposal.
Support for Repatriation
“But this clearly shows that support for bringing global earnings home continues to grow,” she said in a statement. “Repatriation is one of the few ideas in Washington that has generated broad bipartisan support.”
Those lobbying for the tax holiday Brady has proposed say multinational companies would use the measure to transfer billions of dollars to the U.S., which would spur hiring and help economic growth. If companies can pay a tax and keep their money offshore, that could undercut Brady’s argument.
“We’re eager to hear how businesses respond to that,” Brady said.
Daniel Shaviro, a professor of taxation at the New York University School of Law, said Camp’s provision is a reflection of the difficulty of controlling where large corporations keep their money.
“If you require them to actually repatriate it, they could simply round-trip the money and send it right back offshore,” he said. “That would be worse.”
Bloomberg news
Draft legislation that Camp, a Michigan Republican, released yesterday would create a territorial system of taxation, in which the U.S. would only tax domestically generated income. The proposal sets up a tax system in which companies wouldn’t lobby again for a temporary tax holiday because their overseas earnings would be out of reach of U.S. tax authorities.
The proposal is the first piece of a comprehensive U.S. tax code rewrite that Camp intends to unveil over an uncertain timeline. Meanwhile, Representative Kevin Brady, a Texas Republican, is trying to advance a bill establishing a temporary tax holiday that would let companies return offshore profits to the U.S. at a 5.25 percent rate.
A coalition of multinational companies and business groups pressing for the one-time holiday, which includes Pfizer Inc. (PFE) and Cisco Systems Inc. (CSCO), have offered support for both proposals. Brady said the “clock is ticking” for companies to decide what to do with the more than $1 trillion in profits they are holding overseas.
“Our companies are facing tremendous pressure to deploy those stranded profits now,” he said in a brief interview yesterday. “Businesses are going to have to give some thought on what price they’ll pay for a permanent territorial system.”
‘Long-Term Fix’
Camp said he doesn’t view his proposal as being “at cross purposes” with Brady’s legislation establishing a tax holiday. Still, Camp would prefer to resolve the fate of offshore profits once and for all, he said.
“I do believe we want a long-term fix,” he told reporters yesterday. “The goal of this legislation is to have a permanent change.”
Camp’s territorial tax proposal includes a so-called deemed repatriation provision that doesn’t require companies to return offshore profits to the U.S. They would have to pay tax at a 5.25 percent rate as if they had returned the profits. Once they pay the levy, companies can bring the money home 95 percent tax- free.
Other Republicans on the tax-writing Ways and Means committee, including Representative Tom Price of Georgia, said they would support the permanent plan Camp is proposing.
Must Be Permanent
“It has to be permanent,” Price said in an interview. “One of the huge challenges that we’ve got right now is the uncertainty in the economy. If this is just a one-time thing, that’s better than where we are right now, but it doesn’t provide the certainty that’s needed.”
Bloomberg News reported last month that more than 160 lobbyists -- many of them former Hill staffers -- are representing companies and business groups that support a one- time tax holiday.
With that kind of investment, multinational companies aren’t likely to back off their support for a temporary repatriation measure, said Dan Smith, the tax and budget associate for the U.S. Public Interest Research Group, a Washington-based consumer advocacy group.
“I don’t think Camp’s proposal will make the corporations call off the dogs,” he said.
Karen Olick, campaign manager for the WIN America coalition, which is representing the multinational companies seeking the holiday, said the organization would “closely” review Camp’s proposal.
Support for Repatriation
“But this clearly shows that support for bringing global earnings home continues to grow,” she said in a statement. “Repatriation is one of the few ideas in Washington that has generated broad bipartisan support.”
Those lobbying for the tax holiday Brady has proposed say multinational companies would use the measure to transfer billions of dollars to the U.S., which would spur hiring and help economic growth. If companies can pay a tax and keep their money offshore, that could undercut Brady’s argument.
“We’re eager to hear how businesses respond to that,” Brady said.
Daniel Shaviro, a professor of taxation at the New York University School of Law, said Camp’s provision is a reflection of the difficulty of controlling where large corporations keep their money.
“If you require them to actually repatriate it, they could simply round-trip the money and send it right back offshore,” he said. “That would be worse.”
Bloomberg news
No comments:
Post a Comment