NAM Vice President of Tax and Domestic Economic Policy Dorothy Coleman today joined U.S. Sen. Rob Portman (R-OH) and a panel of experts, including representatives from the Organisation for Economic Co-operation and Development (OECD), to discuss key international tax issues, including the Base Erosion and Profit Shifting (BEPS) project recommendations recently released by the OECD.
The panel discussion, “Is There a Tax Policy Crisis?,” hosted by the Bipartisan Policy Forum, focused on the potential impact of the BEPS proposals on U.S. global companies and the critical need for reform of our uncompetitive international tax rules.
The OECD estimates between $100 billion and $240 billion in net “lost” tax revenue every year due to base erosion. Coleman, along with several other panelists, agreed that the BEPS project recommendations seem to be focused on how foreign countries can recoup these “lost” taxes from U.S. global businesses.
Coleman noted that it’s hard to see the benefit of the BEPS recommendations to the United States. Rather, the OECD’s focus on global profit shifting highlights the critical need for a comprehensive overhaul of the U.S. tax system to reflect the global marketplace of the 21st century. In particular, she said that policymakers in the United States should focus on the underlying problems of the U.S. business tax system—the high business tax rates and the double tax burden faced by U.S. global manufacturers and other U.S. multinationals because of our outdated worldwide tax system.
In contrast, most of our competitor nations, including most of the countries that participated in the BEPS project, have much lower rates and territorial tax systems that only tax income earned within their borders. Consequently, to spur economic growth—and additional revenues for Treasury—the focus should be on reforming our outdated tax code by lowering business tax rates and adopting competitive international tax rules.
Coleman also said that manufacturers are concerned by the BEPS country-by-country and master file information sharing and reporting proposals, which would impose substantial and unnecessary compliance costs on companies and, in some cases, force disclosure of sensitive, confidential U.S. taxpayer information. In particular, the NAM is concerned that these filings will lead to more aggressive foreign audits and tax assessments that go beyond international tax norms, especially for U.S. global companies that will be the primary targets. U.S. global manufacturers also are concerned that putting this information into the hands of foreign tax authorities, without any safeguards to protect confidentiality, could put critical commercial information at substantial risk of public disclosure.
Consequently, the NAM is urging Congress to exercise its full oversight authority and thoroughly vet the BEPS proposals and assess their potential impact on American businesses and the U.S. economy before allowing them to be implemented. Moreover, if some of the recommendations are implemented, Congress and the Treasury Department should do all they can to ensure U.S. companies are not forced to disclose sensitive, proprietary business information directly to foreign countries.
Moving forward, Coleman said U.S. policymakers should focus on creating a more favorable tax climate in the United States to make U.S. companies more competitive and attract foreign direct investment. To do that, Coleman said, we urge Congress and the Obama Administration to advance pro-growth, pro-competitiveness tax policy that lowers business tax rates and includes a modern territorial tax system similar to other competitor nations.