Baldor, other corporations oppose foreign income tax law change

A plan proposed by President Barack Obama to change the way American companies are taxed on income derived from their foreign operations is gaining U.S. corporate opposition, including Fort Smith-based Baldor Electric Co.

According to CFO Magazine, Obama asked Congress earlier this year to eliminate provisions that allow U.S. companies to “defer” income from their international operations as part of an effort to raise about $210 billion in federal tax revenue in the next 10 years.

“I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens,” Obama said in a White House announcement.

The deferment rules have been labeled by some as “tax havens” for corporations who seek to avoid paying their fair share of taxes. Citizens for Tax Justice said opponents of Obama’s proposal will say the rule change will make U.S. businesses less competitive in the global marketplace.
 
“Fact: Most of the corporate practices the administration wants to crack down on probably don’t even involve companies that are truly competing abroad. Rather, they involve companies operating within the United States but using sham transactions to make their income appear to be earned abroad, so that the U.S. taxes on that income can be “deferred” (meaning “not paid.”),” CTJ noted in a document urging support for Obama’s plan.

Tracy Long, Baldor’s vice president-investor relations, tells The City Wire that the company actively opposes the tax rule change, and have had discussions with U.S. Sens. Blanche Lincoln, D-Ark., and Mark Pryor, D-Ark. Baldor’s overseas operations includes manufacturing sites in the United Kingdom and China, and the company sells its products in more than 70 countries.
 
“The products we make in foreign countries are meant for foreign markets, and the jobs in those plants wouldn’t exist if we didn’t produce those products overseas. Therefore, we believe if this rule is implemented, it will make us less competitive on a global basis and puts us at a further disadvantage to our foreign competitors,” Long explained.
 
Stacy Hudson Peterson, with Little Rock-based Impact Management Group, is working on behalf of the PACE (Promote America’s Competitive Edge) coalition in Arkansas to drum up opposition to Obama’s tax rule change.

“Proponents argue the guise that these are tax ‘loopholes’ and result in overseas jobs at the expense of domestic ones. The truth is that these provisions aren’t ‘loopholes,’ but intentional tax provisions designed to keep U.S. companies from paying tax rates far beyond what their foreign competitors pay (thus keeping them competitive in their foreign markets),” Peterson said in a statement.

A document prepared by New York City-based Business Roundtable shows there are 477 Arkansas-based companies with foreign operations. The 477 companies, according to Business Roundtable, employ 44.8% of all private-sector employment in the state.

PACE sent a letter dated July 23 — and endorsed by more than 280 businesses and employer groups — to each member of Congress asking them to oppose Obama’s tax deferment rule change.

“The U.S. business community supports closing tax loopholes and prosecuting those who cheat on their taxes. However, the current international tax rules including deferral,
check the box and foreign tax credits are fundamental tax provisions, and are integral
parts of the US tax system – not ‘tax loopholes.’ It is inaccurate and misleading to
represent them as such,” PACE noted in the letter.

Companies based in Arkansas or with operations in the state endorsing the letter included Bentonville-based Wal-Mart Stores Inc., Springdale-based Tyson Foods Inc., Cargill, Kraft Foods, Smurfit-Stone Container Corp. and International Paper.