[Congressional Record (Bound Edition), Volume 145 (1999), Part 5]
[Senate]
[Pages 6422-6423]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                 TAXES

  Mr. DORGAN. Mr. President, today is April 14 and tomorrow is April 
15. That means tomorrow there will be a good many Americans who will 
finish their tax return preparation, go to the post office and drop it 
in the mailbox in order to get an April 15 date stamped on it to comply 
with the tax laws in this country. It is never a pleasant thing, and I 
know most people grit their teeth and wring their hands about the 
responsibility of having to file income tax returns. But most Americans 
do that because they know that we have needs and obligations in this 
country to pay for a defense establishment, to pay for roads, to pay 
for schools--to pay for the cost of civilization, in effect.
  However, not everybody pays their fair share of U.S. income taxes, 
not everybody pays their way. Today, I am releasing a United States 
General Accounting Office report that was done at my request. This GAO 
report, which I hope Members of the House and Senate will read, has 
some rather startling conclusions in it. At about the time most 
Americans will file their tax return and pay the tax bill that they 
owe, this GAO report says there are plenty of special interests in this 
country that don't pay anything--earn a lot of money, but don't pay any 
taxes. They are not taxpayers. Let me describe what this GAO report 
says. The GAO report says that 67 percent of the foreign controlled 
corporations doing business in the United States--67 percent--pay no 
U.S. income taxes at all. Zero in Federal income taxes. In the first 
half of this decade, the General Accounting Office says that the 
percent of foreign-based corporations doing business here and paying no 
U.S. income taxes has ranged from 67 percent to 74 percent. The GAO 
report also shows that U.S. controlled companies fared little better.
  Now, that represents all corporations filing a U.S. tax return. Let's 
just deal with large corporations. That is, corporations defined by the 
GAO as having at least $250 million in assets, or $50 million or more 
in sales; that is a large company. About 30 percent of both the large 
foreign controlled and U.S. controlled corporations doing business this 
country paid no U.S. income taxes--despite having more than $1 trillion 
in sales here in 1995, the latest year for which statistics are 
available.
  In 1995, the large foreign controlled corporations that did pay some 
U.S. income taxes on the profits they made--and some did, the General 
Accounting Office says they paid taxes at a rate that was just about 
one-half of the rate paid by the large U.S. corporations paying federal 
income taxes on their profits here.
  Now, I bring this to the floor of the Senate simply to say this: 
There is still substantial tax avoidance in this country, and it is not 
tax avoidance by working folks, by people who get up in the morning and 
go to work at a job for 8 or 10 hours a day; they aren't avoiding their 
tax responsibilities, because they can't. They must file tax returns. 
They have withholding on their wages and they must meet their 
citizenship requirements in this country.
  As we near April 15, one day away, and the American people are filing 
tax returns, it is reasonable for them to ask, when they hear what is 
within the cover of this GAO report, why do they not see some of the 
largest economic interests that make hundreds of millions of dollars, 
and in some cases billions of dollars--why don't they see those 
economic interests as taxpayers in this country?
  The GAO, some while ago, and other reports, said that one automobile 
maker, a foreign car maker, sold $3.4 billion worth of automobiles in 
this country and paid zero in Federal income taxes. The Presiding 
Officer is from a State that would care about that, the State that 
makes more cars, I suspect, than any other State in our country, where 
most major car manufacturers are located. So how, one would ask, could 
a foreign company come in and sell $3.4 billion worth of automobiles 
and say that ``we want all the advantages and to enjoy all the 
opportunities the American marketplace can give us, but we don't want 
to become taxpayers in your country''? How does that happen? Because we 
have a tax law, in my opinion, that deals with international 
corporations that do business all around the world in a way that allows 
them to jump through massive tax loopholes and, as this report says, 
hundreds of billions of dollars and more of sales in this country and 
then claim to the U.S. Government that they don't owe one penny in 
income taxes.
  There is something fundamentally wrong with that system. I am going 
to come to the floor to speak later about what causes all this and what 
we can do about it. But I did want to disclose the GAO report today 
that says this problem isn't getting better. They did this report for 
me 4 years ago. I asked them to renew it and update it. They have done 
that. The report says this problem isn't getting better. What we have 
is, according to some folks, $10 billion, $20 billion, $30 billion--and 
one report estimates $35 billion--in taxes that should be paid to the 
Federal Government by these international corporations, but that is in 
fact not paid.
  The only way you can retain a tax system of the type we have in this

[[Page 6423]]

country is to have voluntary compliance--that is, to have most people 
complying because they know they have a responsibility to do so. People 
will not voluntarily comply with a tax system that they think is 
unfair. It certainly is unfair to those working families in this 
country, who make $25,000, $35,000, $55,000, $75,000 a year and work 
hard and send their kids to school and pay their bills and stretch 
budgets to make ends meet, and at the end of the year they have to file 
a tax return and pay the Federal income taxes. It is not fair to them 
and it certainly erodes their confidence in this country and in the tax 
system to see some of the largest international corporations doing 
business in America saying, ``We want all the advantages of being able 
to do that, except we don't want to be a taxpayer.''
  I say to those corporations, if you get in trouble, whose Navy are 
you going to ask for to bail you out? I know the answer and so do you. 
If you are going to do business here and make profits in this country, 
you have a responsibility to help pay for that Navy and the many other 
things we do in this country that make it a wonderful place in which to 
live.
  I might just mention some of the ways in which these companies avoid 
paying taxes, just because some people might wonder how this happens. 
It happens through massive tax avoidance schemes called ``transfer 
pricing.'' A foreign corporation decides to do business in the United 
States. It sets up a wholly-owned subsidiary. It manufactures in a 
foreign country, ships it to this country, and then either overcharges 
or undercharges itself, depending on which way the product is going, in 
order to make sure there is no profit shown in this country from its 
activities in the United States. The result of gaming that system and 
preventing the tax collectors at the IRS from seeing what they really 
made is that they are able to cart off their profits from this country 
and avoid paying any taxes at all.
  On April 15, tax day, every American ought to scream at the Congress 
and the tax collection agency to say that we ought to fix this and we 
ought to do it soon. How do we fix it? Well, it is interesting that 
even at a time when GAO is doing this report that shows we have massive 
tax avoidance through transfer pricing--even at this time, this problem 
is getting worse because Congress, at virtually every opportunity, the 
kind of folks who think about these things are slipping little things 
into bills every chance they get to make this problem worse. They just 
did it last fall in a revenue bill with a juicy little tax break worth 
a couple hundred million dollars. With no debate and no hearings, they 
just stuck it in the middle of that bill. It added to the proposition 
that more companies will do business, make profits here and pay no 
taxes here. We have a responsibility to fix that.
  So I appreciate the work the GAO has done. I intend to encourage them 
to keep doing this work to show us who is paying taxes and who isn't. 
Guess what? The working American families are paying taxes. They don't 
have any choice. They may not like it, but they understand the 
advantages of living in this country and what we must pay for for 
ourselves and our children--defense, schools, roads and more.
  If the working families in this country voluntarily comply with this 
tax law--and they do--then I suggest it is time to ask some of the 
largest international corporations selling brand names that every 
single one of us knows to start doing the same thing.
  I am going to bring a report to the floor in the coming days that 
talks about transfer pricing in ways that everybody will understand. I 
will talk about corporations selling to themselves radial tires for 
$2,570 and a tooth brush for $172. Why would companies sell a tooth 
brush for $172 to themselves? So they can soak profits in one direction 
or another and prevent the Federal Government in this country from 
taxing their profits. There are massive schemes of tax avoidance. How 
about a piano for $50? Sound good? I am going to talk about the kind of 
tax avoidance schemes that goes on as a result of this transfer 
pricing, which results, by the way, in this kind of study, which says, 
in conclusion, the largest international corporations in this country--
yes, domestic corporations doing business overseas and foreign 
corporations doing business here are involved in massive tax avoidance. 
We have a responsibility to the American people to stop it. This is not 
rocket science. It is simply standing up to the largest economic 
interests, to say to them you have the same responsibility in this 
country as individual taxpayers.
  You have the same responsibility in this country as the average 
working family has, and that is, you do business here, you profit from 
this system, you have a responsibility to contribute, to pay taxes. 
When you do not do it, we ought to change the law and certainly improve 
enforcement and make sure you do do it, because that is the fair way to 
make sure a tax system works for everybody.
  Mr. President, with that I will be back on a succeeding day to talk 
more about transfer pricing. But I wanted to bring to the attention of 
my colleagues and others the GAO report that is released today that 
describes what I think is a rather dismal conclusion about massive tax 
avoidance by some of the largest taxpayers in the world, doing business 
in this country, making substantial profits, and avoiding the 
responsibility of paying their fair share of Federal income taxes.
  Mr. President, I yield the floor.

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