* Corporations want tax break on offshore income
* White House has wavered in past on regime type
* Tax code overhaul fate murky with crowded agenda
By Kim Dixon
WASHINGTON, Jan 31 The chief of a group of more
than 200 CEOs said on Thursday that President Barack Obama had
told the business community last month he might back a
territorial tax system, a regime that would exempt offshore
corporate profits from U.S. taxation.
Corporate America is pushing for the United States to move
to such a regime to make businesses more competitive against
foreign rivals that pay no taxes on overseas earnings. The
United States currently taxes corporate profits earned abroad
only when they are brought into the country.
In 2011, then Treasury Secretary Timothy Geithner privately
agreed to move to such a regime in failed talks with Republicans
to secure a major budget deal, according to aides present.
During last year's presidential election campaign, Vice
President Joe Biden criticized a territorial tax system,
employing populist rhetoric to blast companies that shift their
business and jobs abroad.
John Engler, president of the Business Roundtable, a CEO
lobbying group, said that in meetings during last month's budget
standoff between the White House and Congress, Obama was moving
back in the business community's direction on the issue.
"He reaffirmed his support for corporate tax reform and he
was acknowledging the importance of ... a territorial system,
which I think had been a little bit of a question," Engler said.
A White House official on Thursday said Obama is eager to
"pursue corporate tax reform that lowers the rate ... but does
not believe that a pure territorial system is the best way to
achieve this goal."
A territorial system is seen as having a chance of winning
approval in Congress only if it were to be coupled with a major
budget deal, where Obama could win some of his priorities.
The Business Roundtable is composed of chief executives from
marquee companies ranging from mega-retailer Wal-Mart Stores Inc
to Wall Street's JPMorgan Chase & Co.
TAX REVAMP UNCERTAIN
Lawmakers in Congress have been working on a tax code
overhaul for more than a year, though its prospects are unclear
given a crowded legislative agenda and disputes over revenue.
Obama last year pitched a corporate tax revamp that included
cutting the top corporate tax rate to 28 percent from 35 percent
and closing a number of business tax breaks to pay for the cut.
Pam Olson, assistant treasury for tax policy under
Republican President George W. Bush and now chief of
PricewaterhouseCooper's Washington tax practice, said Obama's
plan carefully opposed a "pure" territorial tax system, but left
the door open for hybrid systems that might, for instance,
exempt some but not all offshore profits from U.S. taxation.
"The use of the term 'pure' I think, was a signal that they
were willing to consider it," Olson said.
Critics of moving to a territorial system say it will cause
further U.S. jobs and business to move offshore.
A report by the Congressional Research Service, a
nonpartisan think tank for lawmakers, this month said U.S.-based
global companies are increasingly shifting profits into tax
havens like Bermuda and Switzerland. [See: IDnL1N0AXJZJ]
Critics say this proves companies are aggressively skirting
the law to avoid U.S. tax. Business groups say the trend is the
result of the relatively high U.S. tax rate.
The notion of trimming the top corporate tax rate is a rare
area of agreement between Democrats and Republicans on tax
policy, though Republicans want to lower the rate more.
A major hurdle in any tax code revamp would be how to
"broaden the base" of taxpayers, which both sides say is needed
to help fund a tax rate cut. That would mean making hard choices
about scrapping tax deductions, credit and loopholes that some
companies hold dear.
Engler said his CEOs would be willing to give up some perks
if it meant the corporate tax rate could be cut to 25 percent.
"There are credits for the way you handle depreciation,
there are credits on R&D (research and development), there are
credits on this type of manufacturing or this type of
manufacturing product," he said. "They have to be on the table."