Free Republic
Browse · Search
Topics · Post Article

Skip to comments.

Tax cut on foreign earnings could free up $655 billion in working capital: economist
Financial Week ^ | Tim Catts

Posted on 03/29/2009 10:10:00 AM PDT by SeekAndFind

A trade group representing finance executives and treasurers wants Congress to cut the tax rate multinational corporations pay when they tap cash held by foreign subsidiaries. Such a move could help companies hurt by tight credit markets, giving them an alternative source of liquidity, the group said.

“Allowing firms to repatriate funds and bring back foreign earnings into the U.S. will free up much needed working capital for U.S. companies,” said Jim Kaitz, the CEO of the Association for Financial Professionals, the organization behind the letter, in a statement.

Mr. Kaitz cited a similar tax break enacted in 2004, which lowered the rate companies paid on the repatriated earnings of foreign subsidiaries from 35%, the prevailing corporate tax rate, to 5.25%. An analysis by accounting firm Grant Thornton performed last summer found that 843 companies took advantage of that break to access $362 billion in such earnings, reaping $265 billion in tax deductions in the process.

Those same companies could repatriate as much as $655 billion now under a similar scheme, according to a study by economist Allan Sinai of the advisory firm Decision Economics.

“The release of fund to companies from repatriation could well serve to supplement, or substitute for, credit as cash flow would be increased,” Mr. Sinai wrote.

Efforts last year to revive the tax break were defeated in the Senate Finance Committee.

The proposal is one of a handful of ideas under discussion on Capitol Hill designed to tweak the tax code and give companies a liquidity boost.

The National Foreign Trade Council, a business group representing more than 300 multinational corporations, has proposed a measure that it says would encourage companies to borrow from cash-rich foreign subsidiaries for up to two years by waiving the tax that would ordinarily be due on such loans. Morgan Stanley, General Electric and United Technologies are among the plan’s supporters, Bloomberg News reported.

Sen. John Ensign (R-Nev.) introduced a bill earlier this month that would suspend cancellation-of-indebtedness tax rules for two years.

TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: 111th; foreignearnings; johnensign; taxcuts; taxes

1 posted on 03/29/2009 10:10:01 AM PDT by SeekAndFind
[ Post Reply | Private Reply | View Replies]

To: SeekAndFind

They are joking, right? They want Congress to CUT taxes? Anyone else see anything wrong with their wishes?

2 posted on 03/29/2009 10:22:03 AM PDT by FrogMom (No such thing as an honest democrat! Expose their lies!)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794 is powered by software copyright 2000-2008 John Robinson