June 17, 2009 / 8:33 PM / 10 years ago

Summers: Offshore tax will be part of broad U.S. reform

 * Summers: offshore tax part of overall reform
 * US multinationals favor such an approach
 * Funding for healthcare reform still a concern
 By Kim Dixon
 WASHINGTON, June 17 (Reuters) - The Obama administration
will tackle international tax reform in the context of a broad
overhaul of the tax system, a top Obama economic adviser said
on Wednesday.
 That admission should relieve corporate America, which has
been lobbying furiously against a plan to raise $210 billion
over a decade by tightening rules for accounting for income
earned by U.S. multinational companies abroad.
 "We very much want to work with others to make sure that we
have a spare, as pro-American a tax system for corporations as
we possibly can, and it'll be looked at in the context of
overall ... corporate tax reform, I'm sure," Lawrence Summers,
head of the National Economic Council, told CNBC.
 The administration has said its plan would save or create
jobs overseas, but even Democratic-leaning think tanks have
begged to differ, arguing that tax policy has little influence
on jobs.
 U.S. multinationals say the proposals, which include
limiting interest deductions, will in fact encourage them to
locate capital and labor overseas.
 They are quick to note that the United States has among
the highest top corporate tax rate at 35 percent among its
industrialized peers.
 "What he said is a helpful recognition of the reality that
international tax changes should only occur in a larger
corporate tax reform context," said Clint Stretch, managing
principal for tax policy at Deloitte in Washington, who advises
Fortune 500 companies and others.
 "If the White House keeps saying that, clients will start
breathing again," he added.
 In addition to business opposition, Obama's international
tax proposals have gotten a cool reception from members of
Congress, even within his own party.
 "I'd say that it is a helpful signal and consistent with
some of the messages that leading tax writers in Congress have
been saying," said Drew Lyon, a principal with
PricewaterhouseCoopers in Washington.
 "The business community in particular has pointed out that
the changes the administration are proposing are so far
reaching that if they were adopted without other changes they'd
put U.S. companies at a distinct disadvantage."
 Representative Charlie Rangel, the Democratic chairman of
the tax-writing Ways and Means panel in the U.S. House,
proposed many of the same changes to international tax in a
2007 bill.
 But he included a key difference. Rangel's bill had a
sweetener for business: cutting the corporate tax rate from 35
to about 30 percent. Obama has not talked about such a cut thus
far.
 Congress is now debating a healthcare reform bill with a
price tag at $1 trillion or more over a decade, and business is
still concerned they could become a revenue source.
"There is still a significant concern with the discussion of
the $1 trillion to $1.6 trillion healthcare legislation out
there," Lyon said.
 (Editing by Kenneth Barry)

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