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TEI Testifies on Complexity of Tax Code’s International Provisions

TEI Testifies on Complexity of Tax Code’s International Provisions

Calling proposed legislation to simplify the international tax provisions of the Internal Revenue Code a “major leap forward,” Tax Executives Institute President Lester D. Ezrati urged the House Ways and Means Oversight Subcommittee to find ways to bring further clarity to what are among the most complicated provisions in the tax law.

“TEI believes that the Code’s foreign provisions need fundamental reform and simplification,” he said in June 22 testimony, “and for this reason we support H.R. 2018, the International Tax Simplification for American Competitiveness Act of 1999.” The act was introduced on June 7 by Oversight Subcommittee Chairman Amo Houghton and several other representatives, and its provisions address areas including foreign tax credits and the tax treatment of controlled foreign corporations.

“Enactment of this bill,” said Mr. Ezrati, “will generally reduce the costs of preparing U.S. corporate tax returns for American companies engaged in international trade without any material diminution in tax dollars flowing to the treasury. The bill will not only reduce compliance costs — thereby enhancing the country’s competitiveness — but it will also signal Congress’s continued commitment to the simplification of the tax law.”

Any simplification efforts, Mr. Ezrati said, will need to comprehend the changing face of the business environment. “Electronic commerce and business technologies are making it increasingly important for governments and taxpayers to resolve — or forestall — disputes in creative, cost-effective ways, such as advanced pricing agreements,” he said. “And although we see this as a major leap forward, enactment of the bill will not obviate additional reform of the Code’s international tax provisions, particularly in respect of subpart F, which Chairman Houghton himself has singled out as an extremely complex area of the law, the translation of the deemed paid tax credit under section 986, and the elimination of the interest allocation rules.”

TEI’s comments are reprinted in this issue of The Tax Executive, beginning on page 347.

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