* Ways & Means panel Chairman Camp sets news conference
* As reported, Camp expected to back territorial system
* Other components likely to be in tax plan, as well
By Kevin Drawbaugh
WASHINGTON, Oct 26 A senior U.S. Republican tax
writer is set to lay out more details of a plan for tax law
changes, including letting multinational corporations pay
little or no taxes on their overseas profits.
Representative Dave Camp, chairman of the U.S. House of
Representatives Ways and Means Committee, has scheduled a
Wednesday afternoon news conference to discuss "tax reform."
As reported last week by Reuters, Camp favors transforming
the corporate tax code to a "territorial system," an idea
widely supported by multinationals, but not as enthusiastically
embraced by smaller and mid-sized companies with less to gain.
Another component that may be in the Camp plan is some form
of a repatriation tax holiday, a tax break being aggressively
promoted by an army of corporate lobbyists on Capitol Hill.
Under current law, U.S. corporations must pay tax -- most
at the top rate of 35 percent -- on profits earned at home or
abroad, minus credits for taxes paid to foreign governments.
For overseas profits, the U.S. corporate income tax need not be
paid, however, until earnings come into the United States.
While some companies regularly bring home, or repatriate,
their foreign income, many do not. Instead, they park these
profits overseas to avoid taxes. An estimated $1.2 trillion to
$1.5 trillion is stashed abroad for this reason.
Corporations have been waging a multimillion-dollar
lobbying campaign in recent months seeking two related tax
The repatriation tax "holiday" would let them bring home
foreign earning at a discounted tax rate. Some proposals
circulating in Congress would set that rate as low as 5.25
percent, giving the companies a huge, one-year tax break.
Major corporations supporting a repatriation tax holiday
include Apple , Cisco , Google ,
Microsoft , Oracle and Pfizer .
The other break sought by the companies is a territorial
system that would permanently exempt most or all of their
overseas profits from taxation. Camp favors this.
CRITICS HIT TERRITORIAL SYSTEM
Critics say a territorial system would hurt the economy by
driving more U.S. investment and jobs offshore, while also
worsening the federal deficit. Advocates say it would give the
economy a boost and align the U.S. corporate tax code more
closely with those of other major industrialized nations.
The White House's bipartisan Bowles-Simpson deficit
reduction panel last year endorsed territorial taxation.
Such a system has been adopted, in one form or another and
with limitations, by Canada, France, Germany, the Netherlands,
Australia, Switzerland, Japan and Britain.
Nations that still have a worldwide system of taxation
resembling the present U.S. regime include South Korea, Chile,
Greece, Ireland, Israel and Mexico.
China, Brazil and India, growing economies with thriving
manufacturing sectors, also tax the foreign income of their
companies in much the same way the United States does.
Critics of the territorial system say a better idea would
be to repeal the portion of the tax code that allows
corporations to defer paying income tax on foreign profits.
A special deficit-reduction panel in Congress, known as the
"super committee," has been mulling a possible cut in the 35
percent U.S. corporate tax rate. Such a measure could be
coupled with ending some special interest tax breaks.
But the super committee is not expected to have enough time
-- because of a Nov. 23 deadline for finding at least $1.2
trillion in deficit reductions over 10 years -- to do a
complete overhaul of the country's tax code.