COMMENT: Why the US budget will leave American businesses playing catch-up
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

COMMENT: Why the US budget will leave American businesses playing catch-up


Businesses want certainty, and they want quick, decisive action on tax reform. President Barack Obama’s budget did not provide for any of these, and the continuing delays in action being taken could hurt US companies for some time to come.

Before the budget was announced last week, industry bodies were lobbying Obama to implement changes that improve the worldwide competitiveness of American businesses, increase economic growth, and provide for sustained job creation.

Bodies such as the PACE Coalition, Business Roundtable, National Association of Manufacturers and the US Chamber of Commerce, all urged Obama to rethink the announcements he made in his State of the Union address, and to avoid higher taxes on international commerce.

But, following the budget speech, the consensus seems to be that rather than focusing on pragmatic solutions and sound tax policy, the President’s proposals are more geared towards trying to please the electorate and drum up support for his re-election campaign.

It was quite clear that what business wanted from the budget was an insight into the specifics of comprehensive corporate tax reform, but this did not come. Indeed, this was perhaps unrealistic given that the government had already stipulated that the issue would be dealt with separately.

But, some would argue, the budget speech is the ideal platform from which to project such policies, and the lack of it being addressed did leave businesses with a feeling of lingering uncertainty and of nothing being any clearer than before the speech – surely not a good sign.

The critics do have a point. Everything about Obama’s speech seemed to be concentrated on good campaign rhetoric and presidential appeal, rather than the enactment of any fiscal plan. From the school gym setting to the friendly and supportive atmosphere, to the endless case study examples of real local people juggling jobs and real local businesses striving to create jobs, this was definitely Obama in campaign mode.

This is of concern to American businesses because, as pointed out by John Engler, president of the Business Roundtable, the rest of the world is not taking the year off simply because the US is having an election. While other countries continue to propose and implement tax policies aimed at increasing competitiveness and growth, the US cannot afford to wait for the political atmosphere to clear before playing catch-up.

The Obama administration needs to show a more business-friendly approach. Senate Finance Committee member Michael Enzi’s (R-WY) international tax reform bill to adopt a territorial tax system, introduced last week, is a good start and builds on some of the progress made in Dave Camp’s October discussion draft. The bill does not deal with a corporate tax rate reduction, but this will be handled in its own right, though this too should be done sooner rather than later.


BUDGET ANALYSIS: Obama promotes repatriation

REACTION: Obama's inconsistent budget

more across site & bottom lb ros

More from across our site

Burrowes had initially been parachuted into the role last summer to navigate the fallout from the firm’s tax leaks scandal
Barbara Voskamp is bullish on hiring local talent to boost DLA Piper’s Singapore practice, and argues that ‘big four’ accountants suffer from a stifled creativity
Chris Jordan also said that nations have a duty to scrutinise the partnership structures of major firms, while, in other news, a number of tax teams expanded their benches
KPMG has exclusive access to the tool for three years in the UK, giving it an edge over ‘big four’ rivals
But the US tax agency’s advice is consistent with OECD guidance and shouldn’t surprise anyone, other experts tell ITR
A survey of more than 25,000 in-house counsel reveals that diversity initiatives are a high priority when choosing external counsel
The report is aimed at helping 'low-capacity countries', the OECD has claimed
The UK tax agency appears to be going after easier, lower value targets, one lawyer has claimed
Criminal experts have told ITR that the case of Ulf Johannemann emphasises the fine line between tax avoidance and tax evasion
The ATO workers were among nearly 57,000 people who were duped into claiming fake GST refunds, while Kuwait signed a double taxation treaty with the UAE
Gift this article