Barack Obama might back territorial tax system: business chief
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TAX REVAMP UNCERTAIN
Lawmakers in Congress have been working on a tax code overhaul for more than a year, though its prospects are unclear given a crowded legislative agenda and disputes over revenue.
Obama last year pitched a corporate tax revamp that included cutting the top corporate tax rate to 28 percent from 35 percent and closing a number of business tax breaks to pay for the cut.
Pam Olson, assistant treasury for tax policy under Republican President George W. Bush and now chief of PricewaterhouseCooper's Washington tax practice, said Obama's plan carefully opposed a "pure" territorial tax system, but left the door open for hybrid systems that might, for instance, exempt some but not all offshore profits from US taxation.
"The use of the term 'pure' I think, was a signal that they were willing to consider it," Olson said.
Critics of moving to a territorial system say it will cause further US jobs and business to move offshore.
A report by the Congressional Research Service, a nonpartisan think tank for lawmakers, this month said US-based global companies are increasingly shifting profits into tax havens like Bermuda and Switzerland. [See: IDnL1N0AXJZJ]
Critics say this proves companies are aggressively skirting the law to avoid US tax. Business groups say the trend is the result of the relatively high US tax rate.
The notion of trimming the top corporate tax rate is a rare area of agreement between Democrats and Republicans on tax policy, though Republicans want to lower the rate more.
A major hurdle in any tax code revamp would be how to "broaden the base" of taxpayers, which both sides say is needed to help fund a tax rate cut. That would mean making hard choices about scrapping tax deductions, credit and loopholes that some companies hold dear.