May 30, 2014
The Honorable Jacob J. Lew
Secretary of the Treasury
U.S. Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Dear Secretary Lew:
Business Roundtable supports your efforts to promote economic growth through sound economic policies and reducing barriers to trade and cross-border investment.
The OECD - borne out of the Marshall Plan to reconstruct Europe after World War II - has played an important role in promoting economic development and international cooperation toward this goal. In the area of taxation, the OECD has led efforts to prevent double taxation that could impede cross-border investment by developing clear international standards. The OECD also assists countries with analysis of sound tax policies to maximize economic growth.
As you know, at the request of the G20 leaders, the OECD is currently engaged in a fast-paced project to examine perceived gaps in cross-border taxation in today's global economy. The OECD Base Erosion and Profit Shifting (BEPS) project was ostensibly initiated to address potential gaps in the taxation of cross-border income and improve tax coordination among jurisdictions to prevent the creation of "nowhere income." Business Roundtable respects the rights of governments to assert tax, where proper, on income arising within their jurisdictions and encourages companies to comply with the tax laws.
However, current discussions among participants in the BEPS project are raising serious concerns among the U.S. business community and other observers that the project is being used by some governments for the purpose of imposing extraterritorial taxes on U.S. business income. At a minimum, the project is increasing business uncertainty on the taxation of cross-border income. At its worst, it will result in the imposition of new, unprecedented taxes on trade and investment that will freeze business investment and slow economic growth.
Business Roundtable urges the U.S. Government to stand firm in opposing the use of the BEPS project by other governments to redraw the international standards on the jurisdictional authority to impose taxes. These rules have been developed through decades of government-to-government negotiations. If the BEPS project results in a redrawing of long-settled jurisdictional lines so that certain governments can assert questionable claims upon income arising outside their borders, there is an increased likelihood of double taxation.
Further, if the U.S. accedes to such assertions, there will be a direct revenue loss to the United States as taxes once owed to the U.S. will instead be paid to other countries. Increased taxation of U.S. business investment by foreign governments and the inevitable increase in protracted cross-border tax disputes will slow the U.S. economy and hurt American workers.
Moreover, if U.S. businesses holding valuable trade names, trademarks, patents and other intellectual property rights are targeted abroad, this will disadvantage U.S. enterprises relative to their foreign competitors. This hazard would add to the already significant structural disadvantages U.S. companies face because of our worldwide tax system. In a similar vein, the Business Roundtable is gravely concerned about information reporting proposals that could result in the harmful disclosure of confidential and proprietary details of U.S. business operations to competitors or other inappropriate parties.
Although grounded in the principles of consensus and the development of new forward-looking standards, the BEPS project is creating significant risk that countries will adopt tax policies that inappropriately increase both tax and non-tax costs of American worldwide companies on a unilateral basis, in some cases retroactively. The BEPS project thus risks the imposition of new barriers to cross-border trade and investment. With the OECD's long history of promoting sound economic development, it would be a shame i the BEPS project were used to undermine the every purpose for which it was founded.
In sum, increased global sales of goods and services by U.S. enterprises yield higher U.S. levels of investment, jobs, exports and tax revenues for the Treasury. In this way, thriving U.S. business activity in foreign markets is a win for both the U.S. economy and economic progress elsewhere. Business Roundtable strongly urges the U.S. to draw a firm line against tax changes that would target U.S. business and slow U.S. and global economic growth. Thank you for your continuing support.
Louis R. Chênevert
Chairman & Chief Executive Officer
United Technologies Corporation
Chair, Tax and Fiscal Policy Committee