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., Pfizer Inc. and PepsiCo Inc.
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.
The third option would set a 15 percent tax rate on international income from all intangible assets. If a foreign country’s effective tax rate isn’t at least 13.5 percent, the company would have to immediately pay enough U.S. taxes to bring the total to 15 percent.
Camp’s base-erosion proposals represent “a very important and very hopeful area of consensus,” Jason Furman, the deputy director of the White House’s National Economic Council, said at a May 17 National Tax Association conference.