WASHINGTON – Today, global tech trade association ITI released the following statement in response to the U.S. House of Representatives Ways and Means Committee’s publication of legislative proposals related to budget reconciliation:
“U.S companies lead the world in the delivery of technology goods and services, including to the 95 percent of consumers who live outside the U.S,” said Jason Oxman, ITI President and CEO. “The existing U.S. international tax system is critically important to maintain this leadership, support U.S. competitiveness, and promote innovation. However, proposals currently under consideration in both the U.S. House of Representatives and Senate threaten to undercut the United States’ ability to remain a global leader.
“While we appreciate the U.S. House Ways and Means Committee’s decision to protect the United States’ ability to compete for R&D investments and jobs by extending the current treatment of R&D expenses, the full breadth of its proposed reforms must be considered in a comprehensive and thoughtful manner that reflects the benefits to the United States of globally engaged companies and foreign direct investment,” he continued. “Specifically, that includes recognizing how certain provisions will harm U.S. competitiveness, through an increased corporate tax rate and other changes to the interacting levers of the U.S. international tax system. Given that the United States’ international tax regime is already an outlier, we strongly encourage lawmakers to consider the potential impacts to U.S. competitiveness as Congress advances its domestic and international tax agendas.”
As the House Ways & Means Committee holds its markup this week, ITI highlighted the following key priorities:
Creating and maintaining intellectual property (IP) in the U.S. Increasing the foreign-derived intangible income (FDII) rate would limit incentives to keep IP in and to return IP to the U.S. FDII was successful in encouraging several U.S. companies to return IP to the U.S. and its current tax treatment should be retained. Encouraging the location and development of IP in the U.S. provides benefits for U.S. employment opportunities, investment, and the U.S. tax base
Strengthening U.S. technology leadership. Because the U.S. tax rates on foreign earnings are linked to the corporate tax rate, any changes to the corporate tax rate will affect both domestic and foreign earnings. The U.S. is already an outlier with respect to taxing the foreign business income of its multinational companies. Proposed changes such as increasing the rate applied to global intangible low-taxed income (GILTI), reducing the deemed return for qualified business asset investments (QBAI), and moving to country-by-country application of the GILTI regime would put U.S. operations at an even further disadvantage compared to those of global trading partners.
Promoting innovation through R&D investment and jobs. The technology industry in the United States accounts for a large percentage of R&D spending and U.S. exports: U.S. exports of technology products and services totaled $338 billion in 2019 and supported 918,500 U.S. tech industry jobs. Retaining the current treatment of R&D expenses for the next five years, as written in the Committee’s proposal, would protect the United States’ ability to compete for R&D investments and jobs.
Earlier this month, ITI sent a letter to U.S. Senators Ron Wyden (D-Ore.), Mark Warner (D-Va.), and Sherrod Brown (D-Ohio) in response to a request for feedback on their draft international tax proposal.