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Coalition For Tax Competition Endorses Territorial Tax System |
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Written by Center for Freedom and Prosperity
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Tuesday, 26 February 2002 |
Center for Freedom and Prosperity
Press Release - 27 February 2002
For Immediate Release
Wednesday, February 27, 2002
202-285-0244
www.freedomandprosperity.org
COALITION FOR TAX COMPETITION ENDORSES TERRITORIAL TAX SYSTEM,
URGES BUSH ADMINISTRATION TO SUPPORT PRO-COMPETITIVE REFORM
Link to letter: http://www.multiracial.com/letters/2002-02-26.html
The Center for Freedom and Prosperity, joined by more than 20 of the country's largest and most influential free-market groups, asked Treasury Secretary Paul O'Neill to support a territorial tax system for corporate income. Based
on the common sense notion that governments should tax only the income
earned inside their borders, a territorial tax system for corporate income
would dramatically boost the competitiveness of U.S. companies while
fulfilling international trade obligations.
"It is time for the U.S. to junk our antiquated worldwide corporate tax
system and replace it with a streamlined, simple territorial system. This
reform will make U.S. corporations more competitive and it will stop
companies from relocating their headquarters in other jurisdictions," said
Andrew F. Quinlan, President of the Center for Freedom and Prosperity.
International tax reform became a big issue after the World Trade
Organization sided with the European Union and ruled that a section of U.S.
tax law is an unfair trade subsidy. According to the Geneva-based
institution, the United States either must repeal the relevant portion of
the internal revenue code - which would mean a major tax increase on
export-oriented companies - or the European Union will be allowed to impose
as much as $4 billion of annual import taxes on American products. It is
widely believed that this new protectionist burden most likely would fall on
agriculture and aircraft.
Dan Mitchell, McKenna Senior Fellow at the Heritage Foundation, stated,
"Worldwide taxation is bad tax policy, which is why every serious tax reform
plan envisions a shift to a territorial system. But best of all, shifting to
a territorial system will be sweet revenge against the tax-harmonizing
bureaucrats in Brussels. The European Union launched this attack on America'
s fiscal sovereignty, thinking they would force U.S. lawmakers to raises
taxes, and it would be poetic justice if the EU's ploy resulted in a tax
system that will further enhance America's competitive advantage in the
global economy."
The Coalition letter states that territorial taxation has many benefits,
including:
1. Pro-simplification - Worldwide taxation of corporate income does not
raise much money, but it accounts for a huge share of corporate compliance
costs. Complexity would be reduced if the United States taxed U.S.-source
income and other governments taxed the income earned inside their borders.
2. Pro-tax reform - All fundamental tax reform proposals, such as the flat
tax, the consumed-income tax, and various sales tax proposals, are
predicated on territorial taxation. Such a system also is easier to enforce
and would reduce tax evasion.
3. Pro-competitive - U.S. companies could more effectively compete against
foreign companies, many of which are headquartered in nations with
territorial tax systems, if they did not have to pay additional taxes on the
income they earn overseas.
A complete list of the free-market groups can be found on the letter at the link below:
http://www.multiracial.com/letters/2002-02-26.html
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The Center for Freedom and Prosperity is an Alexandria, Virginia-based,
501(c)(4) nonprofit, nonpartisan organization that lobbies Congress and the
Administration on tax competition, financial privacy and fiscal sovereignty.
For additional comments:
Andrew Quinlan can be reached at 202-285-0244,
This email address is being protected from spam bots, you need Javascript enabled to view it
Dan Mitchell can be reached at 202-608-6224,
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Veronique de Rugy can be reached at 202-842-0200,
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