The tax directors of large U.S. manufacturing companies are not unanimous on the value of the tax breaks they would need to sacrifice in order to achieve a lower corporate rate. The executives from Ford Motor Co., 3M, Corning and Air Liquide SA are set to testify at a hearing of the House Ways and Means Committee in Washington. Diane Dossin, chief tax officer at Ford, said that it’s not yet time to select the ones that remain from the ones that have to be removed.
He said that the low rate is the “single most important thing” for Ford’s business to continue to move forward in the U.S. A proposal was made by representative Dave Camp, who also serves as the panel's chairman, to cut the top U.S. corporate tax rate to 25% from 35%. The Michigan Republican hasn't said just how much he wants to make up for the lost revenue.
Compared to the other countries in the industrialized world, the U.S. has the highest statutory corporate tax rate. After considering tax breaks, the effective rate is similar to that of other large countries. According to Henry Gjersdal, vice president of tax and real estate at 3M, the producer of Scotch tape would be willing to give up tax breaks for domestic manufacturing, hastened depreciation and corporate research to get the rate down to 25%.
Dossin said the lawmakers will have to estimate the full impact of the full effects of rate reduction and of revising the tax base as they make these decisions. She said that the base broadening comes with costs that must be compared with the lower rate.
Susan Ford, a vice president at Corning, said that the U.S. tax incentive for corporate research is not competitive, she noted that typically, Asian countries will have to offer major incentives that make overseas investment appealing. She said that when the corporate tax are lowered, it becomes less probable that the companies offer incentives to shift the income offshore. [source: Bloomberg]