[IMGCAP(1)]The number one concern of leading business tax executives for the year ahead is that in light of the current political and fiscal environment, Congress will enact revenue offsets to fund other legislative initiatives rather than make the U.S. tax system more competitive.
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Their concerns surfaced in the annual Tax Policy Forecast Survey, which is distributed annually to tax executives, including vice presidents, managers and directors of tax at a cross-section of large U.S.-based and foreign-based multinationals and major trade associations. This year’s survey is the seventh annual survey, conducted each year by Miller & Chevalier Chartered, and joined this year by the National Foreign Trade Council.
“The survey shows reduced expectations for tax reform in comparison to last year,” noted Marc Gerson, a Miller & Chevalier member and former majority tax counsel to the
Ways and Means Committee.
Business tax executives continue to believe that fundamental tax reform is necessary, but expressed increased doubt that such reform would be enacted in the near future, Gerson indicated. “Respondents said the lack of activity is attributable to a variety of factors, including the existence of competing legislative priorities, a lack of public agreement, budget constraints and a lack of Administration interest.”
Moreover, respondents expressed deep concern over the future of tax policy in 2013, he said. “The focus on revenue offsets and the uncertainty regarding fundamental tax reform presents a very challenging environment for taxpayers this year.”
A majority of respondents also believe that an increase in the U.S. taxation of their international operations will be used for revenue.
“Worldwide American companies favor tax reform that will modernize the U.S. corporate tax rate and tax system to bring it in line with the rest of the world and are clearly concerned that their competitive situation will be further jeopardized by new U.S. taxes being imposed on them to offset pending budgetary problems,” said Catherine Schulz, vice president for tax policy at the National Foreign Trade Council. “The focus on raising revenue from the business sector has business leaders worried about the future of tax reform.”
The current debate over sequestration illustrates the issue of concern over unrelated revenue initiatives. “It has taxpayers concerned because they would be in the posture of being subject to increased taxes but no counterbalanced reduction in tax rates,” Gerson said. “It not only has a short-term impact of increased overall tax liability, but long term it makes reform harder.”
The reason it makes reform more difficult, he explained, is that “the revenue sources that would be used for reform have instead been used for addressing spending issues.”
In other findings, a plurality of business tax executives—34 percent—believe that a continued focus on the economy will have the most positive impact on tax policy in 2013, while 56 percent of executives believe that the Administration’s priorities, which will likely include revenue raising, will have the most negative impact on tax policy in 2013.
These results underscore the executives’ process of determining the impact of the 2012 election results and the enactment of the fiscal cliff legislation, according to Gerson.