[Congressional Record (Bound Edition), Volume 148 (2002), Part 3]
[Extensions of Remarks]
[Pages 3916-3917]
[From the U.S. Government Publishing Office, www.gpo.gov]




      INTERNATIONAL TAX SIMPLIFICATION AND FAIRNESS FOR AMERICAN 
                      COMPETITIVENESS ACT OF 2002

                                 ______
                                 

                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                       Wednesday, March 20, 2002

  Mr. HOUGHTON. Mr. Speaker, today I am introducing a bill, the 
``International Tax Simplification and Fairness for American 
Competitiveness Act of 2002.'' The world economy continues the process 
of globalizing at a pace unforeseen a few years ago. Our trade laws and 
practices as well as our commitment to the World Trade Organization 
have encouraged the expansion of U.S. business interests abroad. 
However, our tax policy lags far behind and seems out of sync with our 
trade policy. In fact, our international tax policy seems to promote 
consequences that may be contrary to the national interest.
  The United States is the largest trading nation in the world. In 
2000, the value of our exports and imports of goods and services was

[[Page 3917]]

about $2.5 trillion, or 25% of our GDP. Although the U.S. is not as 
dominant in the world markets as in the past, foreign earnings from 
1990-1997 represented a greater percentage (17.7%) of all U.S. 
corporate net income than 40 years ago (7.5%). So our economy is 
becoming more trade dependent than ever.

  We confront an economy in which U.S. multinationals face far greater 
competition in global markets. At the same time, U.S. companies depend 
more than ever on these markets for a much larger share of profits and 
sales. In light of these circumstances, the effects of tax policy on 
the competitiveness of U.S. companies operating abroad is of greater 
consequence today than ever before.

  As we continue to discuss fundamental reform of our tax system. I 
believe it imperative to address the area of international taxation. In 
an Internal Revenue Code that is a monument to complexity, there is no 
area that contains as many difficult and complicated rules as 
international taxation. Further, it cannot be stressed enough as to the 
importance of continued discussion between the Congress and Treasury to 
simplify and make fair our international tax laws. The Treasury's 
publicly expressed intent to work with Congress this year to pursue 
meaningful simplification is very encouraging. The Joint Committee on 
Taxation issued a simplification report last year containing many 
simplification proposals. Some relating to the international tax area 
have been included in the bill.

  No one is under any illusion that the measure being introduced 
removes all complexity or breaks bold new conceptual ground. It is also 
recognized that the enactment of the bill in its entirety is not 
likely. It is a list of options from which to choose for an appropriate 
Ways and Means Committee tax bill. I believe, however, that the 
enactment of any portion of this legislation would be a significant 
step in the right direction. Likewise, there are cost implications to 
enactment. There may well be trade-offs in this regard as we pursue 
other changes in the tax and trade areas. Lastly, the bill attempts to 
avoid rifle shot provisions or to create situations for abuse. The bill 
is subject to an ongoing review to make sure these situations do not 
exist.

  The legislation would enhance the ability of the United States to 
continue as the preeminent economic force in the world. If our economy 
is to continue to create jobs for its citizens, we must ensure that the 
foreign provisions of or our income tax law do not stand in the way.

  There are many aspects of the current system that should be reformed 
and greatly improved. These reforms would significantly lower the cost 
of capital, the cost of administration, and therefore the cost of doing 
business for U.S.-based firms. This bill addresses a number of such 
problems, including significant anomalies and provisions whose 
administrative effects burden both the taxpayers and the government.

  The focus of the legislation is to make the international area more 
rational. In general, the bill seeks in modest but important ways to: 
(1) simplify this overly complex area, especially in subpart F of the 
Code and the foreign tax credit mechanisms; (2) encourage exports; and 
(3) enhance U.S. competitiveness in other industrialized countries.

  In summary, the law as now constituted frustrates the legitimate 
goals and objectives of U.S. businesses and erects artificial and 
unnecessary barriers to U.S. competitiveness. Neither the largest U.S.-
based multinational companies nor the Internal Revenue Service is in a 
position to administer and interpret the mind-numbing complexity of 
many of the foreign provisions. Why not then move toward creating a set 
of international tax rules that taxpayers can understand and the 
government can administer? I believe the proposed changes in this bill 
represent a creditable package and a further step toward reform in the 
international tax area and urge your support.

                          ____________________