Big U.S. CFOs Urge Treasury to Reconsider Foreign Tax Credit Rules
On June 3, 2022, 28 Chief Financial Officers (CFOs) of major U.S. corporations (see notes for a list) signed a letter to U.S. Treasury Secretary Janet Yellen urging her to revise the foreign tax credits already in effect in 2022 to finally regulations to address the negative impact of these regulations on the competitiveness of enterprises.
The CFOs asserted that the final rule “is very different from established law” and said it “creates the inability to credit many traditional foreign income taxes, including taxes from major countries and even from the largest U.S. trading partner.” Reasonable credits have been available for over a century.” Failure to credit these taxes would result in double taxation for U.S. businesses, the very harm that foreign tax credits try to avoid. The CFOs added that the final rule would put “U.S. businesses at a competitive disadvantage versus foreign-based businesses, helping foreign companies expand their overseas market share at the expense of goods and services manufactured by U.S. businesses and U.S. workers.”
The CFOs further stated that the additional costs incurred by the final rule will be widely felt throughout the U.S. economy through U.S. operations and supply chains. Furthermore, the final regulation goes well beyond the scope of the Digital Services Tax (DST), which was the original motivation for its adoption.
The CFOs discussed that under the final rule, foreign withholding tax credits on many labor and royalties would not be credited, which would encourage U.S. companies to provide labor, develop patents and other intellectual property locally abroad to avoid double taxation. As a result, the CFOs are asking the Treasury Department to revise the final rule and make the revised draft available for public comment within an appropriate time frame.
Note: These large companies include:
– The Coca-Cola Company;
– The Dow Chemical Company;
– General Electric Company;
– IBM Corporation;
– Johnson & Johnson;
– Kimberly Clark Corporation;
– Verizon Communications;
– Procter & Gamble;
– The Walt Disney Company; and
– Warner Bros. Discovery.