Washington, D.C. – On Tuesday (03/17/15), the U.S. Senate Committee on Finance, led by Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), held a hearing entitled, “Building a Competitive U.S. International Tax System,” to examine how the U.S. international tax system can be improved to foster economic growth, job creation and greater innovation.
The Committee heard witness testimony from experts, including Pamela F. Olson, United States Deputy Tax Leader and Washington National Tax Services Leader at PricewaterhouseCoopers LLP in Washington, D.C., Anthony H. Smith, Vice President of Tax and Treasurer at Thermo Fisher Scientific Inc. in Waltham, Mass., and Dr. Rosanne Altshuler, Professor of Economics and Dean of Social and Behavioral Sciences at Rutgers University in New Brunswick, N.J.
At the hearing, Chairman Hatch advocated strongly for international corporate tax reform stating, “As we look at our international tax system our goal should be to make the U.S. a better place to do business and to allow American job creators to more effectively compete with their foreign counterparts in the world marketplace….Not only must our corporate tax rate come down across the board, we should also shift significantly in the direction of a territorial tax system.” He also noted, “If we want companies to remain in the U.S. or to incorporate here to begin with, we should not build figurative or legal walls.”
Ranking Member Wyden endorsed a comprehensive approach to tax reform by adding, “The deal makers are always going to get around piecemeal policy changes, and nothing short of bipartisan, comprehensive tax reform, in my view, is going to end that cycle.” He stressed the urgency of addressing reform and said that it is “legislative malpractice to sit by and let this situation fester.”
Expert witness Olson testified that “reform of our international tax rules is essential to economic growth and to the success in today’s global market place for American businesses.” She called the current tax system a “barrier” to American business and said that its “driving businesses away.” Olson also pointed out that 95 percent of the world’s customers live outside the United States and that “U.S. businesses can’t serve those rapidly growing markets by staying home. Just as the global economy has changed, so have tax systems around the world.”
To demonstrate that the U.S. is far behind in terms of global norms, Olson pointed out that 28 of 34 OECD member countries have territorial systems that limit tax to income from activity within their borders. She said, “Eliminating the disadvantages our country faces by aligning ourselves with the tax policies used by the rest of the world would be a far better response than building higher walls around an uncompetitive tax system. The global economy we live in increases both the competition American companies must face and the opportunities available to them. “
Senator Chuck Schumer (D-NY), a member of the Finance Committee, shared his concerns about the way in which our current tax system hinders the competitiveness of U.S. multinational companies within the global market: “One point that’s really stood out to me—one that I don’t think we’re paying enough attention to on the Hill up here—is the fact that the rest of the world is already acting. We around talking in theory about tax reform. Other G-20 governments are proactively enacting new tax policies…It’s a game of ‘Hungry, Hungry Hippos,’ and we’re sitting on our hands as other countries try to gobble up the field.”
Smith echoed these sentiments, stating that “the goal of international tax reform is not to reduce U.S. tax paid, but rather is to reduce the ways the U.S. tax system impedes the flexibility and productivity of U.S companies with global operations.” He added that incentivizing U.S. companies to bring earnings from overseas would grow jobs.
Lawmakers and witnesses agreed that there is broad, bipartisan agreement that our international corporate tax system is broken. Altshuler described our current tax system as “induc[ing] inefficient behavioral responses” by businesses and applauded the Committee for holding the hearing and urged the Committee to “tackle the challenge of reforming our system.”
