European AmChams Discuss Tax in Washington

Text by Scott Dille, AmCham Denmark 

Members of the European Council of American Chambers of Commerce (ECACC) met with Congressmen, U.S. Chamber of Commerce officials and the Secretary of Commerce to discuss the most pressing issue threatening trans-Atlantic trade and investment: the current legislation proposal that would keep U.S. based companies from deferring taxes on income earned abroad. The three day conference took place from June 3 to June 5.

President Obama, some labor unions and some members of Congress have recently proposed to disallow the deferral of income taxes on income earned abroad by American corporations. Currently, U.S. multinationals are not taxed on income earned by their foreign subsidiaries until that income is remitted to the U.S. parent company as dividends. Because of this, the majority of income is re-invested in the foreign subsidiary, a practice that strengthens job growth not only in foreign countries, but also domestically as more jobs are needed to support exports and foreign sales. The proposal, if passed, would increase taxes on U.S. multinationals by $210 billion.

U.S. Commerce Secretary Gary Locke and Berit Salheim Managing Director AmCham Sweden

The U.S. top official on trade, Commerce Secretary Gary Locke, met with the ECACC delegation to discuss the proposal and the importance of strong trans-Atlantic ties. He said the political climate combined with the current economy opened up the proposal for serious discussion but also stressed the need to avoid any barriers that would impact the trade between Europe and the U.S. Locke offered generous thanks to AmChams across Europe for their hard work in promoting trade and investment and said their input and comments are always welcome at the Department of Commerce.

The tax proposal comes at a time of rising unemployment and is meant to incentivize U.S. multinationals to invest in jobs domestically. According to President and CEO for the U.S. Chamber of Commerce, Tom Donohue, the proposal would likely have the opposite effect, as companies might choose to incorporate outside of the U.S., and put U.S. multinationals at a competitive disadvantage due to higher rates of taxation. Donohue said the U.S. Chamber is undertaking massive efforts to defeat the proposal including going into legislative districts to explain the benefits of free trade and capital flows and naming names of those Congressmen that oppose it.

Similarly, many Congressmen in states that rely heavily on open borders to trade and investment are speaking out against the proposal. The ECACC delegation also met with Senator Chuck Grassley (R-IA) who expressed his opposition to the proposal. Grassley noted, however, that public support for the proposal is strong and politically difficult to oppose. The sound bites the public receive from proponents are very powerful, often depicting multinationals as avoiding taxes and sending jobs abroad, and make a strong case for ending the practice of tax deferral. Even though evidence to contrary is abundant, it is difficult to communicate this to the public.

 
Senator Chuck Grassley (R-IA)

According to former Congressmen and now Government Affairs Director at Deloitte Tom Davis (R-VA), a compelling argument for defeating the proposal does exist and must be used. Davis said that the message that must be made clear is that U.S. multinationals will be at a competitive disadvantage, weakening the U.S. trade position globally. This, says Davis, is something that people will not willingly accept. Nearly every one of America’s trading partners has chosen a territorial tax model in which the country of incorporation does not make any tax claims on income earned abroad. If the current proposal is passed, U.S. companies would have a much higher tax rate compared to competitors incorporated outside the U.S. This would threaten profits and subsequently jobs – the opposite of the proposal’s intended effect.

Throughout the three day conference, ECACC presented decision makers with argumentation and materials highlighting the negative impact any change to tax deferral would have on U.S. multinationals and offered their continued support to enhancing trans-Atlantic trade and investment.

To read more about the impact this proposal could have, go to www.pace4jobs.org. The PACE Coalition is dedicated to promoting and increasing the more than 50 million American jobs that depend on the international competitiveness of worldwide American companies. The website not only provides a wide range of information but also offers ways to voice concerns to key decision makers.

In addition to the proposal to eliminate tax deferral, ECACC executive directors met with senior executives from the U.S. Chamber, Business Roundtable, and the European American Business Council (EABC) to discuss a wide range of trade and regulatory issue, including:

• Upcoming legislation on the financial markets
• Proposed legislation on climate and energy
• U.S. healthcare
• The need for trans-Atlantic regulatory cooperation
• Barriers to company transfers of skilled workers
• Unfair EU tariff categories for electronic printers and other media

The final day ended with a dynamic point-counterpoint on the future of the Democratic and Republican parties with Bill Greener, president at Greener and Hook, and David Heller, president at Mainstream Communications.

The 3-day conference concluded with a dinner reception hosted by Honeywell at their exclusive offices overlooking the U.S. Capitol. The more than 100 guests included Congressmen Joe Wilson (R-SC), ambassadors and embassy representatives, senior trade officials as well as representatives from U.S. and European businesses.

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Commerce Secretary Gary Locke's Speech

Business Roundtable President John Catellani's Speech