Senate Finance Chairman Releases International Tax Reform Drafts
The Senate Finance Committee Chairman, Senator Max Baucus, D-Mont., released on Nov. 20 the second draft proposal for international tax reform legislation in the span of two days. The overhaul is needed to address the current tax code’s failure to adapt to a rapidly changing global economic landscape that is ramping up profit value from intellectual property, said a Finance Committee Nov. 19 release (here). Moreover, U.S. foreign investment has skyrocketed to $4.2 billion from $52 billion 45 years ago, said the release, adding that tax havens are increasingly attracting investment, registering $1.7 trillion in total. The drafts aim to accomplish the following, according to the Nov. 19 release and a Nov. 20 release (here):
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- Reduce incentives for U.S. and foreign multinationals to invest in, or shift profits to, low-tax foreign countries rather than the United States.
- Reduce incentives for U.S.-based businesses to move abroad, whether by re-incorporating abroad or merging with a foreign business.
- Increase the ability of U.S. businesses to compete against foreign businesses in foreign markets.
- End the lock-out effect by taxing the foreign income of U.S. businesses either immediately when earned or not at all.
- Simplify the international tax rules so that firms with the most sophisticated tax advisors are not advantaged.
- Simplify the tax filing process
- Provide the IRS with new tools to combat tax-related identity theft and assist victims of theft
- Reduce the tax gap by increasing information reporting in certain areas, providing the IRS with additional collection tools and clarifying that the IRS may regulate tax return prepares.
The Finance Committee is seeking comments by Jan. 17, 2014 via tax_reform@finance.senate.gov. The committee is currently considering measures on streamlining information returns, roll-over of small information return errors, correctable taxpayer errors, the role of IRS appeals, penalties, further electronic filing reform, death master file access, taxpayer privacy and protection of taxpayer rights. “Today’s release of Chairman Baucus’ international tax reform draft underscores the ongoing conversation about how we can fix our broken tax code so that America is a more attractive place to hire and invest,” said House Ways and Means Chairman Dave Camp, R-Mich., on Nov. 19 (here). A Senate Finance Committee spokesman said the third draft will be released on Nov. 21, but declined to comment on when legislation will be introduced.
The National Foreign Trade Council, however, rejected the draft proposal, claiming the reform will penalize multinational companies and hamper competitiveness. “We are disappointed in the draft and look forward to a robust discussion with the Senate Finance Committee as the tax reform process continues,” said NFTC Vice President for Tax Policy Cathy Schultz in a Nov. 20 statement.
Email ITTNews@warren-news.com for a copy of the NFTC release.