Offshore Accounts Present a Taxing Situation
One man’s tax “loophole— is another man’s legitimate road to business profits.
So it’s no surprise that President Barack Obama’s comments this week detailing a proposal to put the kibosh on deferred tax payments for overseas profits has raised the ire of much of the U.S. business community. Companies with international operations say they need the deferral to remain competitive in the global marketplace and say they will take their gripes over Obama’s plans to Congress.
“This issue is absolutely our top priority right now,— said Ralph Hellmann, the top lobbyist for the Information Technology Industry Council, which has joined other business groups in the Promote America’s Competitive Edge coalition. Obama’s proposals, he added, “would hurt our ability to sell in other countries because our competitors would have a tax advantage over American companies, and they would undersell us.—
That, in turn, would cost U.S. jobs, he said.
Obama’s plan would stop U.S.-based companies from deferring taxes paid on profits kept in foreign countries. And the president also called for greater sunshine in offshore bank accounts held by Americans. But he has to get his proposals through Congress, where already some Members, including Democrats, have raised concerns.
Groups like Hellmann’s and the PACE coalition are focusing much of their lobbying efforts on the Senate and have hired well-connected firms such as the Breaux Lott Leadership Group’s former Sens. John Breaux (D-La.) and Trent Lott (R-Miss.).
But just how unified the business community will remain is an open question. One Democratic business lobbyist working the issue said that Obama’s best hope for success on the tax issues is to “divide and conquer— big business.
This lobbyist added that the business community could further be thwarted if tax legislation is attached to another bill where the money raised from it would help pay for increases in health care spending.
“If it were a stand-alone bill, no question we could fight this. But attached to something like health care, that could be a tough fight,— said the lobbyist.
The president also focused his rhetoric on “tax havens— pointing to the Cayman Islands as an example, and putting lobbyists who represent interests in the Caribbean country also on the defensive.
Anthony Travers, chairman of the Cayman Islands Financial Services Association, has turned to the Washington lobbying firm Quinn Gillespie & Associates for help.
“What we’re really trying to do at the moment is correct a number of staggering misconceptions about the role the Cayman Islands plays,— Travers said. “The notion that there’s a pot of U.S. money sitting in Cayman, evading U.S. tax, is a complete fabrication.—
Instead, Travers said, the Cayman Islands is fully transparent when it comes to taxation, and with Quinn Gillespie’s help, he plans to come to Washington for meetings to offer his side. “The message is: For heaven’s sake, take a look at the facts. Stop calling the Cayman Islands a jurisdiction where tax evasion takes place. The opposite is true,— he said.
His isn’t the only Cayman-based group to turn to D.C. insiders for help. Maples and Calder, a Grand Cayman law firm whose Ugland House address is widely used for businesses that incorporate partnerships in the country, hired Hogan & Hartson this spring on the offshore taxation issue, while Miller & Chevalier client Garmin Ltd., an electronics company, is keeping track of the international tax proposals.
Marty Regalia, the U.S. Chamber of Commerce’s chief economist, didn’t much care for the president’s rhetoric, either.
He said it is a difficult environment to discuss tax policy against the “demagoguery and misleading statements that were presented by the administration.—
“They have continually called these tax loopholes and tax havens,— he added. “We’re trying to educate people why these things are [in the tax code], how companies use them and how they’ve helped to create and grow jobs and keep jobs in the United States. This was not an 11th-hour sneak-in by some nefarious lobbyists. … Some of these were instituted in the Clinton administration.—
An administration conference call with association and business leaders after Obama’s official address did little to assuage fears. Led by Gene Sperling, counselor to Treasury Secretary Timothy Geithner, the call on Monday offered the business community few specifics and perhaps raised more concerns, said one participant.
“There were not details, just the rhetoric,— this participant said.