Copyright 1999 Plain Dealer Publishing Co.
The
Plain Dealer
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July 18, 1999 Sunday, FINAL / ALL
SECTION: BUSINESS; Pg. 2D
LENGTH: 619 words
HEADLINE:
TAX LAWS;
BLAMED;
FOR FOREIGN;
TAKEOVERS;
COMPANIES URGE;
SYSTEM OVERHAUL
BYLINE: By ROB WELLS; BLOOMBERG
NEWS
DATELINE: WASHINGTON
BODY:
Burdensome tax laws on U.S. corporations'
overseas activities are a factor in foreign corporate takeovers of U.S. firms,
according to a corporate-financed study.
"If we don't change the tax
code, we are literally driving jobs out of this country," House Ways and Means
Chairman Bill Archer said. Archer's remark came as major accounting firms and
corporations released a study of cross-border mergers last year which showed
foreign companies made 34 acquisitions of U.S. companies - twice as many as the
U.S. companies' 17 acquisitions of foreign companies. The study by
PricewaterhouseCoopers was of mergers exceeding $500 million.
The study
referred to acquisitions such as that of Amoco Corp. by British Petroleum Co.
and Chrysler Corp. by Daimler-Benz AG. It's intended to support the corporate
community's call to simplify tax laws governing international activities of U.S.
firms.
"U.S. tax rules that are out of step with those of other major
industrial countries are now more likely to hamper the competitiveness of U.S.
multinationals in today's economy," said Peter Merrill, a principal at
PricewaterhouseCoopers LLP. He testified on behalf of the National Foreign Trade
Council.
Fred Murray, vice president at the National Foreign Trade
Council, cited a study by the Organization for Economic Cooperation and
Development that found the United States and Japan tied as the "least
competitive G-7 countries for a multinational company to locate its
headquarters, taking into account taxation at both the individual and corporate
levels."
Also urging the committee to simplify international tax laws
were executives from Daimler-Chrysler Corp., Caterpillar Inc. and American
Express Co.
John Loffredo, DaimlerChrysler's chief tax counsel, said
complex U.S. tax laws were a factor in the decision to have the newly combined
firm locate itself in Germany instead of the United States.
"The U.S.
tax system did not give me any weapons to fight to make it a U.S. company,"
Loffredo said.
Loffredo and other executives backed a bill to overhaul
international tax laws sponsored by New York Republican Rep. Amo Houghton and
Rep. Sander Levin, a Michigan Democrat. The measure would permanently extend a
tax deferral of active financing income. That deferral allows banks and
financial services companies to put off paying taxes on income generated abroad
until the funds are brought back to the United States. Major manufacturers said
this deferral is important to competing successfully overseas and continuing to
create jobs in the United States.
"If we are to maintain our primary
philosophy of 'build it here and sell it there,' we need a modern tax policy
that is consistent with our global focus,' said Sally Stiles, international tax
manager for Caterpillar Inc. The plan is especially important for Caterpillar to
compete on a level playing field with overseas companies when it offers
financing to purchase its tractors and other equipment.
The
Houghton-Levin bill also would simplify reporting by U.S. companies engaged in
10-50 joint ventures, in which a U.S. company owns 10 percent to 50 percent of
an overseas company. The bill would let companies group income from 10-50
ventures, instead of reporting each venture separately, after Jan. 1, 2000.
Current law that won't allow this until 2003.
The bill would also
eliminate a discrepancy on tax recapture rules for domestic and foreign
operations when a company experiences a loss one year and a profit the next.
It also calls on the Treasury to study whether the European Union should
be treated as a single country for tax purposes and to study rules on allocating
interest expenses between domestic and overseas operations.
LOAD-DATE: July 19, 1999 
