US Companies Push Back on One Idea for Taxing Their Foreign Profits

US Companies Push Back on One Idea for Taxing Their Foreign Profits


The corporate lobbying push on tax reform is moving full speed ahead. If you watch cable news, you’ve likely seen ads from the Business Roundtable and other groups that are already spending millions of dollars to promote tax reform on television and radio. But not all the efforts are so public.

In a piece in Sunday’s Wall Street Journal (paywall), Richard Rubin offers details on one behind-the-scenes campaign by corporations to shape tax reform. Rubin reports that a group of large U.S. companies called the Alliance for Competitive Taxation issued a policy paper earlier this month warning against the “unintended and adverse consequences” of forcing companies to pay a minimum tax.

Such a minimum tax is reportedly one option under consideration as part of a shift to a territorial tax system, with a lower corporate rate for domestic profits, intended to incentivize companies to bring back some of the profits they have stashed in foreign countries to avoid paying a relatively `high tax rate on those earnings at home.

Rubin explains: “Republicans want to lower the corporate-tax rate and let companies bring future global profits home without paying U.S. taxes on top of foreign taxes. They are searching for a way to do that without giving companies an incentive to move more operations and profits to countries with far lower taxes.”

The minimum rate would be below the new statutory corporate rate and act to reduce the incentive to keep foreign profits in other countries.

But the companies in the alliance, including Eli Lilly, United Technologies and UPS, warned that a minimum tax would put American corporations at a disadvantage to their global competitors.

“We would continue to have a tax code that is out of step with the rest of the world,” said David Lewis, vice president for global taxes at Eli Lilly, which the Journal reports now has $28 billion in profits that haven’t been taxed in the U.S.

Kyle Pomerleau of the conservative-leaning Tax Foundation wrote recently that a broad minimum tax on foreign earnings would still give companies incentive to move their headquarters out of the U.S. to avoid the tax.

But Chye-Ching Huang, deputy director of federal tax policy at the left-leaning Center on Budget and Policy Priorities, tweeted Monday that multinational corporations want a “cartoon” version of the territorial tax system — one that would bring “0% US tax on their foreign profits. Giant incentive to shift profits offshore. Weak guardrails to stop it.”