Technology and pharmaceutical companies such as Cisco Systems, Oracle and Johnson & Johnson have formed a new coalition to push for lighter taxes on income earned outside the U.S.
The LIFT America Coalition — that’s Let’s Invest for Tomorrow — will urge Congress to adopt a so-called territorial tax system that would exempt most income earned around the world. Most other major industrialized countries use such a system.
Currently, companies face U.S. taxes on income they earn around the world; they can defer that tax until they bring the money home and offset it with foreign tax credits.
The biggest challenge in designing such a system is creating rules that prevent companies from shifting the U.S. tax base abroad. Rep.Dave Camp, chairman of the House Ways and Means Committee, suggested options to prevent such “base erosion” in 2011 that some companies objected to.
Other members of the group are Procter & Gamble., United Technologies and International Business Machines.
In part because of the U.S. tax code, companies have stockpiled about $1.9 trillion in profits outside the country.
“Having competitive tax rates and a competitive territorial system are worthy goals that ultimately increase confidence, create certainty, and ensure good jobs for America,” Greg Hayes, the chief financial officer of United Technologies said in a statement. ” These reforms will enable both old and new companies with American headquarters to succeed today and in the future, sharing their products, services, talents and technologies with the world.”