Wyden Statement at Finance Committee Hearing On OECD BEPS
As Prepared for Delivery
Today’s Finance Committee hearing on international tax comes just two weeks after the headlines announced yet another tax inversion. This time it’s Pfizer merging with Allergan and moving its headquarters overseas in pursuit of a lower tax bill.
Pfizer’s move is further proof of what everybody in this room knows to be true -- our tax code is badly broken, outdated, and a drag on our economy.
This hearing will be the third time in 18 months that the Committee has examined the need for international tax reform. In that time, the Treasury Department has taken multiple steps to slow the spread of the inversion virus. But the fact is, Treasury can only do so much to quarantine the problem. There is only one solution to this crisis, and it is comprehensive tax reform.
While our broken tax code sits in place, an antiquated monument to a different economic era, the sands are shifting around it, and more and more of our tax base is eroding into an international sea of harmful tax practices and ruinous tax competition.
Until Congress summons the political will to do what we know must be done, inversions will continue to happen, and you can bet Pfizer’s won’t be the last—and maybe not the largest. Foreign governments will continue to use our obsolete tax code against the U.S. by agreeing to give certain companies sweetheart deals to locate in their borders.
As matters have continued to spin out of control, the largest economies in the world—acting through the G-20 and the OECD—came together to develop the most significant global tax policy project in decades to address the rampant Base Erosion and Profit Shifting that is unraveling the world’s tax systems, straining enforcement resources, and draining treasuries around the world. It is a massive effort with a singular goal to make it harder to game the system.
When it comes to the BEPS proposal, as it’s known, there are big questions that have to be answered. Many of them will require close study and action from Congress. But I do want to acknowledge the hard work of our Treasury witness, Robert Stack, effectively advocating the interests of the United States in the BEPS discussions. The U.S. had a very steep hill to climb in those negotiations, and he should be commended for his efforts and those of his colleagues.
I am also concerned about recent aggressive actions undertaken by the European Commission targeting what it has described as unlawful “state aid” but look an awful lot like the tax planning strategies our broken tax code drives multinational firms to pursue.
But in my view, here’s the bottom line. If you’re a member of Congress with concerns about BEPS or the unprecedented actions taken by the European Commission, then comprehensive tax reform is your opportunity to design the tax system our nation needs. If you shudder at the mention of tax avoidance schemes like the “double Irish with a Dutch sandwich,” comprehensive tax reform is the way to crack down. If you want to give companies a reason to invest, grow and headquarter in the U.S., comprehensive tax reform is the only path to reach those goals.
The longer comprehensive tax reform is delayed, the more our tax base will dwindle. In my view, that’s the backdrop today as the Finance Committee examines the BEPS proposal and other important tax issues.
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