By Bernie Becker - 03/30/11 12:11 AM EDT
IBM is breaking with other American multinationals by not pushing for a corporate tax holiday, a proposal the company argues would preoccupy Congress and sidetrack the drive for tax reform.
Representatives from the computer giant are scheduled to meet Wednesday with Treasury Department officials and lawmakers. They are expected to stress that the push for a tax holiday is a distraction from the pressing need to address the corporate tax code.
Padilla said that the conversation over tax reform — which involves lawmakers on both sides of the aisle— has shifted over the last year to the point where a plan could realistically pass Congress.
“There’s no question that comprehensive reform is a challenge,” Padilla said. “But I don’t think people would argue anymore that our current tax system creates competitiveness. So I don’t think we should assume this is impossible to do.”
IBM’s stance will almost certainly be well-received at Treasury, which reiterated last week that it was against looking at a corporate tax holiday only as part of a wider discussion about tax reform.
But the WIN America Campaign, a group that includes more than 20 businesses and organizations that are pushing for the tax holiday, pushed back on IBM’s comments.
Doug Thornell, an adviser to the group, said the organization has never suggested that
enacting a repatriation measure would be easy.
“Like IBM, the WIN America Campaign strongly supports comprehensive reform,” Thornell said in a statement. “But this is likely to take some time, so in the short term why not allow U.S. businesses the freedom to inject nearly a trillion dollars in global earnings into America’s economy?”
Members of the WIN coalition have said a tax holiday is one of the more feasible options available for stimulating the economy and have called for allowing corporations to bring profits back to the U.S. at a tax rate around 5 percent — vastly below the current top corporate rate of 35 percent.
Congress passed a similar law in 2004 that allowed multinationals to return revenue from abroad at a top rate of 5.25 percent. IBM turned out to be one of the corporations that took greatest advantage of the holiday, bringing roughly $9.5 billion back to the United States.
IBM officials stressed that they are not opposed to another tax holiday and said it was premature to say whether the company would participate if one were approved. Padilla also said that, even without a holiday, IBM had brought roughly $20 billion back to the U.S. over the last two years.
It is unclear whether another tax holiday has enough support to pass Congress.
In addition to the Treasury, Sen. Max Baucus (D-Mont.), the chairman of the Senate Finance Committee, has expressed skepticism about whether the last tax holiday created jobs. And Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, has signaled that repatriation should be examined within the context of talks over tax reform.
Still, the idea of a holiday has a backer at the highest levels of Congress, with House Majority Leader Eric Cantor (R-Va.) endorsing it last week. And at least two separate House Republicans have either already introduced legislation on the topic or are planning to shortly.
Padilla, the IBM vice president, said that the issue of corporations’ offshore profits would have to be dealt with in any corporate tax reform package. In fact, IBM’s preference would be for the U.S. to move to a territorial tax system and offer more permanent incentives for research and development.
And Padilla said that in their Wednesday meetings — which will in large part include lawmakers who represent areas with IBM employees or facilities — the company will stress that its take on repatriation is far from a complete break with its fellow corporations.
“We have common views of the problem, just a different take on what the remedy is,” he said.