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Business views on Chairman Camp's discussion draft.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) invited stakeholders to analyze the discussion draft released in October 2011 [by Camp] and to provide constructive feedback on the proposals to achieve revenue-neutral tax reform. Financial Executives Research Foundation (FERF), in collaboration with Financial Executives International's (FEI) Committee on Taxation (COT), polled and interviewed senior tax executives to get their views on the discussion draft.

Among the key findings:

* Senior financial executives are attracted to the main elements of the Camp discussion draft--fiscally responsible corporate tax reform that promotes economic growth through a competitive statutory corporate tax rate and an internationally competitive participation exemption (territorial) tax system

* Senior financial executives wish to participate in the further development of these proposals and to offer their technical expertise and practical experience regarding ways to improve the U.S. tax system.

* Senior financial executives urge Congress to maintain a focus on U.S. competitiveness to ensure that any revenue-raising tax proposals do not undermine the overall goal of improving the ability of U.S. companies and workers to be globally competitive in both domestic and foreign markets.

The U.S. corporate tax system is viewed as less competitive than other countries' tax systems. A majority of tax executives polled and interviewed felt that, on average, their foreign competitors were subject to more favorable corporate tax systems in their home countries.

They pointed to lower corporate tax rates, territorial tax systems and more favorable R&D and manufacturing incentives. "I don't believe any of our competitors have a worse tax system than the U.S.," said the chief tax officer of a large multinational manufacturing company.

Corporate rate reduction and territoriality are viewed as critical components of tax reform. As discussed above, several tax executives cited lower corporate tax rates and territorial tax systems as key reasons other countries have more advantageous tax systems for business than the United States.

"I think the key for everybody is a corporate tax rate lower than 25 percent; this would help any company regardless of size," said one tax executive.

Several tax executives said a territorial tax system would encourage U.S. investment of foreign earnings by removing the tax impediment to increased remittances.

Incentives to reward retention and development of intellectual property (IP) in the U.S. are also important to some businesses. "If the proposal included an 'innovation box,' we would invest in even more R&D in the U.S.," said a tax executive at a large technology company. The U.K. and other countries have adopted innovation or "patent" box regimes that provide preferential tax rates on certain income related to intellectual property.

Companies are still evaluating the potential impact of U.S. tax reform proposals. A number of tax executives said they had reviewed the Camp discussion draft and expressed support for the overall goals of lowering the corporate tax rate and adopting a territorial tax system. However, some tax executives suggested the need to refine and further develop the details of the territorial tax proposal and understand the domestic base broadeners before they could evaluate the potential impact on their companies.

"The question for us is will the number get low enough and how will they pay for it?" a tax executive said. "The real key to the U.S. economy is economic growth and we should be mindful of adopting tax policies that enhance our growth," the tax executive said.

Among the positive factors from reform noted by tax executives was the reduction in uncertainty from enactment of a stable, permanent tax system and their belief that a lower rate and territorial tax system could enhance economic growth and increase the global competitiveness of American companies.

The executives expressed a strong interest in continuing to assist policymakers in their efforts to reform the tax system, understanding the constraints of doing so in a revenue-neutral environment.
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Publication:Financial Executive
Article Type:Conference news
Geographic Code:1USA
Date:Jan 1, 2013
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