Issue Date: May 11, 2009
Business Groups Oppose Tax Hikes
THE BUSINESS COMMUNITY, including the chemical and pharmaceutical industries, has sharply criticized President Barack Obama's proposal to increase taxes on the foreign earnings of U.S.-based multinational corporations.
The sweeping plan, which Obama unveiled last week at the White House, would boost taxes on corporate foreign earnings by more than $100 billion over a decade by revising a policy that lets companies defer paying taxes on income earned abroad and by closing the loopholes of foreign tax credits.
"I want to see our companies remain the most competitive in the world," Obama said. "But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens."
Currently, U.S. firms are allowed to defer paying taxes on income earned overseas if they plow those profits back into their foreign subsidiaries. During his presidential campaign, Obama vowed to change the deferral rules, saying they encourage companies to bolster their foreign operations instead of creating jobs in the U.S.
Business groups warn that Obama's tax proposals would damage U.S. competitiveness. "This plan will reduce the ability of U.S. companies to compete in foreign markets, which will not only reduce jobs, but will also cripple economic growth here in the U.S.," says John J. Castellani, president of the Business Roundtable, an association of CEOs at major U.S. companies.
A group of 200 companies and trade associations recently sent a letter to congressional leaders urging them to oppose changes to the deferral regime, saying the break is needed to compete in global markets because most other industrialized countries do not tax the foreign income earned by their native companies. Bayer, Dow Chemical, DuPont, Eli Lilly & Co., Merck & Co., and Pfizer are among the firms that signed the letter.
"Limiting deferral and further restricting foreign tax credits would simply increase the U.S. corporations' tax bill based on their overseas operations, making them less competitive against their foreign-based competitors," says John M. Engler, president of the National Association of Manufacturers. "In turn, the impact would fall hard on U.S. companies, their suppliers, and their employees here at home."
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