PLAYING BY THE RULES TAX AVOIDANCE BY FOREIGN CORPORATIONS While American taxpayers are working harder for less, huge multinational corporations with billions of dollars in U.S. sales are using accounting gimmicks to pay outrageously low U.S. taxes. Foreign controlled companies in the U.S. are avoiding paying their fair share of U.S. taxes by inflating costs through transfer pricing. * By the IRS's own admission, 72 percent of foreign-controlled corporations doing business in the U.S. paid no U.S. income tax in 1989. [IRS Commissioner Shirley Peterson, April 9, 1992 testimony before the House Ways and Means Subcommittee on Oversight] * Forty percent of the returns filed by 18 foreign electronic distributors showed no tax due while reporting $30 billion in sales. One company with sales in excess of $6.6 billion paid no U.S. tax at all. [House Ways and Means, 1992] * In 1985, 17 foreign-controlled companies with U.S. subsidiaries had $16.7 billion in receipts and paid $1 billion in taxes. By 1989, these firms had quadrupled their receipts to $63.6 billion. However, their taxes decreased by almost $600 million. [House Ways and Means, 1992] BIPARTISAN AGREEMENT ON THE PROBLEM Several Republican lawmakers think the revenue potential is even greater than the numbers in the Clinton Plan. * Senator Jesse Helms (R-NC) and Representative Duncan Hunter (R-CA) stated that foreign companies should have paid $30 billion more in corporate income taxes in 1988. [Chicago Tribune April 9, 1992] * Republican Senator Alphonse D'Amato, who also placed the lost revenue at $30 billion annually, recently wrote that "it is an outright crime that for over a decade foreign companies have been cheating the American taxpayer and the government out of billions each year." [June 22, 1992 letter to Congress] * Democratic Representative J.J. Pickle, Chairman of the House Ways and Means Subcommittee on Oversight, wrote that "it is the failure to collect legally-owed taxes from foreign multinationals that puts American workers at a competitive disadvantage." BUSH'S FAILURE TO ACT Foreign corporations continue to avoid paying their fair share of U.S. taxes and the Bush Administration does nothing. * The House Ways and Means Committee said that the IRS is "outgunned and outmanned." And even though last month's hearings documented that foreign-controlled firms still aren't paying their fair share, President Bush's FY 1993 Budget does not include additional resources for the IRS to enforce existing law. [President's FY 1993 Budget] * Since the Oversight Subcommittee's hearings in 1990, the IRS has failed to complete even one international simultaneous audit. [IRS response to Representative Pickle, April 8, 1992] * Tax expert Thomas Field of Tax Analysts said that the IRS typically settles for 10 cents on the dollar of its initial claims against foreigners, and, according to Newsweek, "the IRS doesn't dispute that." [Newsweek April 15, 1991] The Administration does not take positive action, and even actively discourages solving the problem. * Former IRS officer Edward Romoff, one of the first IRS officials to investigate transfer price abuses, testified that "he was consistently harassed, chastised and threatened" for his investigation of the transfer price problem. [HWM Subcommittee Testimony, April 9, 1992]. It is not surprising that the Administration does not encourage foreign corporations to pay their fair share when almost half of all former senior trade officials represent foreign countries. * The Center for Public Integrity reports that 47% of former senior officials of the office of U.S. Trade Representatives, including their former Trade Representatives, have registered, or work for firms registered as, foreign agents. Carla Hills is the first U.S. Trade Representative to have been registered as a foreign agent before entering office. [Charles Lewis, America's Frontline Trade Officials, Center for Public Integrity, 1990] THE CLINTON PLAN Governor Clinton understands the importance of foreign investment as can be seen by his record in Arkansas; he just wants companies to pay what they rightfully owe -- their fair share. * Governor Clinton is not creating a new tax, he just wants to enforce the law. Under the Clinton plan, those companies that play by the rules pay no additional taxes. In fact, most companies will pay less because of the Clinton plan's targeted investment tax credit and R&D tax credit. * With Clinton as Governor, Arkansas has tripled the number of companies in Arkansas with foreign investment -- the number of foreign companies investing in Arkansas has grown from 35 to 104, with much of the progress coming from the successful foreign trade missions. -30-30-30- BUSH SPENDS HUNDREDS OF MILLIONS OF TAXPAYER DOLLARS TO SHIP OUR JOBS OVERSEAS As revealed in a 60 Minutes expose this past weekend, taxpayers are paying to encourage U.S. firms to move their jobs overseas. Under Bush and Reagan, the U.S. Agency for International Development has spent hundreds of millions of dollars to encourage firms to move to Central America - - with much of the effort targeted at U.S. firms. * U.S. manufacturers that move jobs to Central America and the Caribbean receive low interest loans, free worker training, construction of office and manufacturing space, and an elimination of tariffs. At least $289 million have gone to these programs and for promotion of "export zones." These programs are administered by the State Department under James Baker's supervision. * The U.S. government spends more for worker training overseas than George Bush wanted to spend on trade adjustment assistance worker training here at home. * The "export zones" target the U.S. textile and electronics industries. In recent years, some 500,000 textile and apparel jobs and 200,000 electronics workers lost their jobs here in the U.S. * Since 1990, the same U.S. companies that have been operating in Central America have been involved in 65 plant closings and 13 mass layoffs at their factories in the United States. Almost 15,000 workers -- many of whom are women struggling to help support their families -- have lost their jobs. * U.S. taxpayers paid for an ad campaign that encouraged businesses to ship jobs to lower-paying El Salvador. "Rosa Martinez produced apparel for U.S. markets on her sewing machine in El Salvador," the ad read. "You can hire her for 57 cents an hour. Rosa is more than just colorful. She and her co-workers are known for their industriousness. They make El Salvador one of the best buys." The ad was funded by FUSADES, an El Salvadoran export promotion group that is almost entirely funded by U.S. tax dollars, and that has offices in the U.S. seeking to woo American firms. In a 1991 agreement, U.S. AID instructed FUSADES that "within the U.S., the regions with the greatest concentration of relevant firms are likely to be in the Northeast and Southeast." Similar programs have been set up in Guatemala, Honduras, Jamaica, Costa Rica and elsewhere. * There's no better example of paying to lose our jobs than the Marcade Group's Decaturville, Tennessee plant, which was closed last year. The jeans and other goods that were made in Tennessee are now made in El Salvador, with loans and construction partly paid for by the U.S. government. U.S. law prohibits duty-free imports from countries that violate fair labor standards, such as the right to organize unions. But a U.S. government official, taped by a 60 Minutes hidden camera, said that managers of the Export Zones will screen out potential workers who might want to join a labor union. Half a dozen managers of firms operating out of a U.S.-financed zone told CBS that workers who want to join unions can be fired on the spot, and their names placed on blacklists. Whose side is George Bush on? His government refuses to support job training here at home; he supports tax breaks to move jobs overseas. And he attacks Bill Clinton's plan to require foreign corporations to pay the same taxes as domestic firms. Now it turns out that his government is actively working to persuade American businesses to move abroad. It's time we had a President who put people first -- and who stood up for American workers and American interests. [SOURCES: CBS 60 Minutes, "Hire Rosa Martinez", 9/27/92; Paying to Lose Our Jobs, National Labor Committee Education Fund in Support of Worker and Human Rights in Central America; LA Times, 9/24/91] -30-30-30-