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Post Event Summary
The U.S. has the highest combined corporate tax rate in the developed world and faces a worsening fiscal situation. On the other side of the Atlantic, however, the U.K. recently adopted a package of fiscal reforms, including a significantly lower corporate tax rate. On Thursday at AEI, experts assessed the applicability of British reforms to the U.S. situation.
David Gauke of Her Majesty's Treasury presented the U.K.'s reforms and emphasized the goals they intend to achieve, focusing in particular on the reduction of the U.K.'s corporate tax rate from 28 to 24 percent. Following Gauke's remarks, Dick Gephardt, former majority leader of the U.S. House of Representatives, posited that a similar decrease in the U.S. corporate tax rate could only be achieved as part of a larger effort to encourage economic growth and job creation.
James Hines of the University of Michigan then discussed the U.K.'s decision to switch from a worldwide system of taxation to a territorial system. Hines argued that a similar transition would be the right course of action for the U.S., despite potential challenges. The panelists ultimately agreed that there are many interesting lessons to be learned from the British reform model, yet conceded that differences between the two systems complicate the scenario.
The U.K. coalition government set out a high-level, five-year corporate tax reform road map in its 2010 budget, aiming to create the most competitive corporate tax regime in the G20. Exchequer Secretary to the Treasury David Gauke has stated that the U.K. government is prioritizing corporate tax reform to make the tax system a U.K. asset once again.
To date, the U.K. has (1) reduced its corporate tax rate from 28 to 24 percent, with a further reduction to 22 percent scheduled by 2014; (2) adopted a participation exemption ("territorial") regime for the taxation of foreign affiliate earnings; (3) increased deductions for research and development (R&D) and set out plans to allow all enterprises to convert excess R&D deductions into refundable credits; and (4) beginning in 2013, will reduce the tax rate on qualified patent income to 10 percent.
Separate U.S. corporate tax reform proposals have been set forth by President Obama and the House Ways and Means Committee Chairman David Camp, but no legislative action has been taken to date. This conference will assess the U.K. corporate tax reform program and consider whether it is a suitable model for the United States.
Alan Viard, AEI
John Samuels, General Electric
The U.K. Corporate Tax Road Map
Will Morris, General Electric
David Gauke, Her Majesty’s Treasury, U.K.
Should U.S. Tax Reform Follow the U.K. Model?
Michael Devereux, Oxford University
Dick Gephardt, Gephardt Government Affairs and Former Majority Leader, U.S. House of Representatives
James Hines, University of Michigan
Stephen Shay, Harvard Law School
Martin Sullivan, Tax Analysts
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Michael Devereux is the first director of the Oxford University Centre for Business Taxation, where he is professor of business taxation. Devereux also holds research fellowships at CESifo and the Centre for Economic Policy Research. He is editor-in-chief of International Tax and Public Finance and Assistant and editor of the British Tax Review. He is the founding research director of the European Tax Policy Forum and is president of the International Institute of Public Finance. Devereux has also served as an adviser and consultant on corporation tax to the European Commission, the Organisation for Economic Co-Operation and Development, the U.K. government and the International Monetary Fund. He has likewise acted as a consultant to projects in the private sector.
David Gauke was appointed exchequer secretary to Her Majesty’s Treasury on May 14, 2010. He has been the member of Parliament for Hertfordshire South West since May 5, 2005. David was a member of the Treasury Select Committee from February 2006 until he was appointed a shadow minister for Her Majesty’s Treasury in June 2007. As a shadow Treasury minister, he focused on tax policy, including matters such as tax simplification, corporation tax reform and Her Majesty’s Revenue and Customs. Gauke qualified as a solicitor in 1997 and worked for a leading city firm before entering Parliament in 2005.
Dick Gephardt is president and CEO of Gephardt Group Government Affairs. He provides strategic advice to clients on issues before the U.S. House of Representatives, Senate and Executive Branch. Gephardt served in the House of Representatives from 1976 to 2004, representing Missouri’s 3rd Congressional District. In his first year in Congress, he was appointed to both the House Ways and Means and Budget Committees. He was elected to serve as House Democratic leader for more than 14 years, as House majority leader from 1989 to 1995 and as minority leader from 1995 to 2003. In his role as leader, Gephardt emerged as one of the leading strategists of the Democratic Party’s platform and as chief architect to landmark reforms ranging from health care, pensions, education, energy independence and trade policy. Widely known for his advocacy of international human rights, Gephardt currently serves as chairman of the National Endowment for Democracy, a private nonprofit organization that endeavors to strengthen democratic institutions around the world through non-governmental efforts. He is a member of the Council on Foreign Relations and an advisory board member to the International Conservation Caucus Foundation. Before founding Gephardt Group Government Affairs in 2007, Gephardt served at DLA Piper LLP, where he now serves as a strategic adviser on international trade and government affairs. Gephardt began his career in public service in 1968 as a precinct captain to 14th ward of St. Louis, Missouri. From 1971 to 1976, he served as alderman for the city’s 14th ward.
James Hines is the L. Hart Wright Collegiate Professor of Law at the University of Michigan Law School and the Richard A. Musgrave Collegiate Professor of Economics in the Department of Economics at the University of Michigan. He also serves as the research director of the Office of Tax Policy Research in the Stephen M. Ross School of Business. His research is focused on various aspects of taxation. He taught at Princeton University and at Harvard University before joining the Michigan faculty in 1997, and has held visiting appointments at Columbia University, the London School of Economics, the University of California, Berkeley and at Harvard Law School. He is a research associate of the National Bureau of Economic Research, co-editor of the Journal of Public Economics, and once, long ago, was an economist at the U.S. Department of Commerce.
Will Morris is currently senior international tax counsel and director of European tax policy in General Electric’s (GE) corporate tax department. At GE, Morris works on a wide range of international tax matters relating to GE’s foreign operations, with primary responsibility for coordinating GE’s European tax policy program. He is qualified as a U.S. attorney and an English solicitor, and after working in private practice in London and Washington, D.C., he joined the Internal Revenue Service in 1995, moving to the Office of Tax Policy at the U.S. Department of the Treasury in January 1997 to work on international tax policy. Morris was associate international tax counsel at the Treasury Department until March 2000 and was recently appointed chair of the CBI Tax Committee. He is also chair of the AmCham European Union Tax Taskforce and is the chair elect of the BIAC Tax Committee. He is also chair of the European Tax Policy Forum, a registered U.K. charity that sponsors independent academic research into business tax issues.
John Samuels is the vice president and senior counsel for tax policy and planning at General Electric (GE). He is responsible for GE’s worldwide tax organization and for the company’s global tax planning and tax compliance operations. He is a member of GE’s corporate executive council, the GE capital corporation board of directors, the GE finance council and the GE pension board. Before joining GE in 1988, he was a partner in the law firm of Dewey Ballantine in Washington, D.C., and New York City. From 1976 to 1981, Samuels served as the deputy tax legislative counsel and tax legislative counsel of the U.S. Department of the Treasury. Samuels is also the chairman of the International Tax Policy Forum, a fellow of the American College of Tax Counsel and a member of the University of Chicago Law School Visiting Committee. Samuels was an adjunct professor of taxation at the New York University School of Law (1975 to 1986) and is currently the Jacquin D. Bierman Visiting Lecturer at Yale Law School where he teaches courses in international taxation.
Stephen Shay is a professor of practice at Harvard Law School. Before joining the Harvard Law School faculty, Shay was deputy assistant secretary for international tax affairs in the U.S. Department of the Treasury, and before re-joining the Treasury Department in 2009 he was a tax partner for 22 years with Ropes & Gray LLP. Shay served in the Office of International Tax Counsel at the Treasury Department, including as international tax counsel from 1982 to 1987. Shay has published scholarly and practice articles relating to international taxation and has testified for law reform before congressional tax-writing committees. He has had extensive practice experience in the international tax area and has been recognized as a leading practitioner in “Chambers Global: The World's Leading Lawyers,” “Chambers USA: America's Leading Lawyers,” “The Best Lawyers in America,” “Euromoney's Guide to the World's Leading Tax Advisers” and “Euromoney's Guide to the Best of the Best.” Shay has been active in the American Bar Association Tax Section as a council director and chair of the Committee on Foreign Activities of U.S. Taxpayers, in the American Law Institute as an associate reporter, in the American Tax Policy Institute as a member of the board of trustees and in the New York State Bar Association Tax Section and the International Bar Association.
Martin Sullivan is an economist who writes regularly for Tax Analysts publications. He worked in the U.S. Department of the Treasury from 1986 to 1988, on the Joint Committee on Taxation from 1988 to 1992 and at Arthur Andersen LLP from 1992 to 1994. Since 1995, he has been a contributing editor for Tax Analysts, where he has written over 400 articles for Tax Notes, Tax Notes International and State Tax Notes. He has written two books on tax reform, and he has served on the staff of the Treasury Department and on the staff of the Joint Committee on Taxation. Sullivan has also worked as an economic consultant in the private sector.
Alan Viard was a senior economist at the Federal Reserve Bank of Dallas and an assistant professor of economics at Ohio State University before joining AEI. He has also worked for the U.S. Department of the Treasury’s Office of Tax Analysis, the White House's Council of Economic Advisers and the Joint Committee on Taxation of the U.S. Congress. Viard is a frequent contributor to AEI's Tax Policy Outlook, AEI's On the Margin column in Tax Notes and AEI's Marginal Impact column in State Tax Notes. In January 2010, he was named a nominee for 2009 Tax Person of the Year by Tax Notes. Viard is also the co-author of “Progressive Consumption Taxation: The X Tax Revisited” (May 2012).