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By Ronald Fink
Corporate tax executives are clearly worried President Obama will make good on his threat to crack down on foreign earnings, a survey released Tuesday showed.
The survey of 128 large multinational corporations and major trade associations by the Washington, D.C., law firm of Miller & Chevalier found U.S. taxation of international operations was the top business tax concern for 2010. This is the first time the issue topped the list of concerns since the survey was started in 2007.
The Obama administration has proposed a number of measures that would make it harder for multinationals to avoid or defer U.S. tax, although the U.S. currently has the second-highest statutory corporate tax rate among members of the Organization of Economic Cooperation and Development.
Forty percent of the respondents named U.S. taxation of international operations as their top concern in 2010, while thirty seven percent cited management of effective tax rates.
"Respondents to our survey are reacting to a number of legislative proposals already on the table that, if enacted, would increase the U.S. tax treatment of international operations," said Miller & Chevalier member Marc Gerson, former tax counsel to the House Ways & Means Committee.
In other findings, the survey respondents overwhelmingly believe there is a need for a fundamental overhaul of the current corporate tax structure, but fewer than two percent believe it is likely in the coming year.
In contrast, 48 percent believe the president's tax agenda is likely to be dominated by extending expired provisions. Two-thirds of respondents believe that the 2009 "extenders" package will be enacted into law in 2010.
Of the potential sources of tax revenue they think are likely to be tapped this year, nearly three-quarters of the respondents cited an increase in the U.S. taxation of international operations; 67 percent said increased taxes on capital gains, dividends and interest; and 61 percent cited codification of the economic substance doctrine, under which the Internal Revenue Service will challenge a transaction if the agency believes it is motivated chiefly by tax considerations.
Almost 50 percent of the survey respondents said they thought the elimination or reduction of LIFO benefits would be a source of tax revenue likely to be tapped in the coming year.
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