[Congressional Record (Bound Edition), Volume 149 (2003), Part 1]
[Extensions of Remarks]
[Page 303]
[From the U.S. Government Publishing Office, www.gpo.gov]




FAIRNESS, SIMPLIFICATION AND COMPETITIVENESS FOR AMERICAN BUSINESS ACT 
                                OF 2003

                                 ______
                                 

                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                       Wednesday, January 8, 2003

  Mr. HOUGHTON. Mr. Speaker, I am pleased to join my colleagues, Mr. 
Sam Johnson from Texas, Mr. Portman from Ohio and Mr. Ramstad from 
Minnesota, in introducing a bill, the ``Fairness, Simplification and 
Competitiveness for American Business Act of 2003''. This bill is very 
similar to the one I introduced in the last Congress, and contains many 
of the provisions that have been included in past bills I have 
sponsored on international tax matters. 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. That 
process continues with passage of the Trade Promotion Authority 
legislation and recent announcements of various free trade agreements 
that have been completed or are being negotiated. However, our tax 
policy lags far behind and seems out of sync with our trade policy. 
Many would argue that our international tax policy seems to promote 
consequences that may be contrary to our national interest.
  The United States continues to be the largest trading nation in the 
world. In a $10 trillion- plus economy, current data indicate that the 
value of our exports and imports of goods and services continues to 
represent about 25% of our GDP. It is no secret that our economy is 
more and more trade dependent, as our companies depend on overseas 
markets for a much larger share of profits and sales.
  Recent cases with the WTO show how our trade relations with various 
countries or blocks of countries affect the competitiveness of U.S. 
multinationals vis-a-vis their foreign competitors. Tax policy 
sometimes becomes intertwined with trade policy. For example, how we 
comply with the WTO ruling that our foreign sales corporation/
extraterritorial income tax provisions are a prohibited export subsidy 
highlights the significance of these matters to our economy. The ruling 
allows sanctions that would amount to an annual $4 billion-plus 
potential hit against U.S. exports, unless we come into compliance. The 
forty-year-plus history behind the FSC/ETI and predecessor provisions 
was all about trying to make our companies tax competitive with their 
foreign competitors.
  I don't believe anyone would seriously dispute that our tax system, 
in general and especially as it relates to international taxation, is 
overly complex and basically out of date. Many provisions were enacted, 
e.g. subpart F, in a totally different era as far as the world economy 
and competitiveness are concerned.
  The focus of the legislation is to make the international area more 
rational. The proposal contains a number of provisions to simplify and 
make fair our international tax laws. In general, the bill seeks in 
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. The bill includes some provisions proposed by 
the Joint Committee on Taxation in its simplification report issued in 
2001. In addition, Treasury officials have repeatedly stressed the 
importance of updating our international tax laws.
  Some of the provisions in the prior bill have been modified to be 
consistent with H.R. 5095, introduced in the last Congress by the 
Chairman of the Ways and Means Committee. In addition, provisions 
relating to subpart F have been added from that bill. They are 
essential to updating that portion of the Internal Revenue Code.
  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 we have a unique opportunity in the 
108th Congress to make significant progress in enacting reform in the 
international tax area. I urge your support of the proposal.

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