US Treasury To Explore Business Tax Competitiveness

by Mike Godfrey, Tax-News.com, Washington

11 July 2007

United States Treasury Secretary Henry Paulson, has announced that a one-day conference will be held on Thursday, July 26 in Washington, D.C. to examine ways in which the current US business tax system affects economic growth and US competitiveness in the global economy.

The conference will feature input from Paulson and other senior Treasury Department figures, including Under Secretary for Domestic Finance Robert Steel, Assistant Secretary for Tax Policy Eric Solomon, and Deputy Assistant Secretary for Tax Analysis Robert Carroll. Participants from the private sector have yet to be confirmed by the Treasury.

The announcement comes as US lawmakers ponder the question of fairness in the business tax system, particularly with regard to the tax treatment of limited partnerships - specifically private equity and hedge funds - which typically do not pay income taxes like regular corporations, but investment taxes at the much lower rate of 15%.

Two bills currently are currently before Congress that would seek to bring some limited partnerships' earnings into the corporate tax system, meaning they would face paying income tax at 35%.

Paulson has indicated that he would be against such legislation because it is too narrowly targeted towards a single industry, and would run counter to the administration's goal of simplifying the US tax code.

However, the Treasury has said that the conference will not be concentrating on just the fund issue but will have a wide ranging agenda. "It will look at the entire business tax system," a spokesman from the department told Reuters.

The conference will be the second this year convened by Paulson to examine the issue of US business competitiveness. In March, the Treasury Secretary called a conference to explore capital market competitiveness, which featured billionaire investor Warren Buffett and other big names from Wall Street and the corporate world. This preceded Paulson's announcement in June of the second stage of his capital markets competitiveness action plan, which focuses on maintaining the global leadership of America's capital markets.

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