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1963 1964 1965 1966, 1967 1968 1969 1970 1971 1972 1973 1973 1974
Jan. Oct. Jan.. thru thru Mar.. Sept. Dec.
[From Congressional Record] PUBLIC SUPPORTS THE HARTKE APPROACH TO TRADE—LATEST ROPER POLL,
Mr. HARTKE. Mr. President, I might point out that a recent poll taken by Mr. Roper shows that one of the most astonishing facts developed was the situation that the American people were terribly upset about the loophole that was given to multinational corporations and oil multinationals in particular. I ask unanimous consent to have printed in the Record a summary of that finding by the Roper organization.
There being no objection, the Summary was ordered to be printed in the Record, as follows:
[Issued First of April, 1973]
LOYALTIES OF MULTINATIONALS CHALLENGED 66%, in damning indictment, say U.S. companies operating abroad put own interests above those of U.S.
NO TAX CREDITS FOR U.S. COMPANIES ABROAD 67% think U.S. multinationals should not be allowed to deduct foreign taxes from U.S. taxes owed. Full U.S. taxes should be paid.
PUBLIC COOLISH TOWARD FOREIGN TRADE Only one-fifth want more foreign trade, 3 in 10 want less. Greatest resistance to more trade among union members.
MOST WANT EXPORT-IMPORT BALANCE 65% want exports to equal imports.
FOREIGN COMPANIES HERE ? By modest margin, public favors foreign companies operating in U.S. 50% think government should encourage them, 39% would discourage them.
MORE JOBS FOR AMERICANS 60% say foreign firms here would mean more jobs.
On another subject, would you like to see more trade between the United States and foreign countries than we now have, less trade than we now have, or about the same amount of trade we now have? More trade, 21 percent; Less trade, 30 percent; Same amount, 33 percent; and Don't know, 15 percent.
What do you think the long range goal of the United States should be when it comes to foreign trade-to export more than we import, or to import more than we export, or to have exports just about equal imports ? Export more, 18 percent; Import more, 4 percent; Have exports about equal imports, 65 percent; and Don't know, 13 percent.
When American companies have operations in another country they usually have to pay taxes on their profits to that country. Do you think they should be allowed to deduct the amount of those taxes from what they are required to pay in United States taxes, or that they should be required to pay full taxes on their profits to the United States? Should be allowed to deduct foreign taxes, 19 percent; Should pay full taxes to the U.S., 67 percent; and Don't know, 14 percent.
Consonant with other signs of a national drawing inward noted in recent surveys, public sentiment is coolish toward increased foreign trade. Three out of ten favor less trade between the U.S. and other countries, while only two in ten want more foreign trade. One-third would keep trade at current levels. Greatest support for increased foreign trade is among executives/professionals (37%), the college educated (34%), the affluent (33%), and the politically and socially active (32%)). Greatest resistance to foreign trade is found among union members and blue collar workers (37%), probably because they see job threats.
EXPORTS VS. IMPORTS Two-thirds of the public think exports and imports should be in balance. Howerer, higher than average support for an export surplus comes from the affluent (31%), the college educated (28%), executives/professionals (27%), and the politically and socially active (26%).
OVERSEAS COMPANIES PAY FULL U.S. TAXES ? Perhaps influenced by recent reports on high oil company profits, and general suspicions about U.S. companies operating abroad (see I), two-thirds of the public thinks that American companies operating overseas should not be allowed to deduct foreign taxes from their U.S. tax bill, but rather pay full taxes on their profits to the U.S. Government. Again, the affluent, the better educated, and executives/professional are most likely to concede the point of subtracting foreign taxes, but even these groups favor full U.S. tax payments by two to one.
The tax credit feature of Burke-Hartke has strong public support.
AMERICAN COMPANIES ABROAD The legend of “the ugly American" abroad extends in many minds to the American corporation. Two-thirds of the public believes it likely that American companies operating abroad put their own interests above those of the United States. This is a damning indictment indeed, and only two out of ten would defend overseas companies from it. Most convinced that companies abroad place corporate above national interest are Westerners (77%), political and social activities (76%), executives/professionals (74%), the college educated (74%), and the affluent (72%).
FOREIGN COMPANIES : AMERICAN OPERATIONS By contrast, foreign companies should be encouraged to establish operations in the United States, say half the public. Another two-fifths thinks such operations should be discouraged. This is rather lukewarm acceptance, and in tune with general lack of enthusiasm about increasing foreign trade and regulations.
Last October the public expressed itself as against encouraging U.S. companies to operate overseas (50% to 26%). If the public's wishes were carried out, it would mean all multinational companies would be foreign, a conclusion not all who answered may have thought their way through to. Some education on international trade seems to be needed.
How widespread fears are of foreign “takeovers" was not measured; but another probable effect of foreign companies building plants here was: impact on American jobs. By a margin of six to one, Americans see foreign companies operating here as bringing more jobs to Americans, undoubtedly the main reason for favoring such operations.
There has been speculation to the effect that when large American companies have operations abroad they sometimes make agreements with other countries that are in conflict with U.S. foreign policy and not always in the best interests of the United States. Most of these large companies have denied this, and say they do not do anything that conflicts with U.S. foreign policy. What do you think is likely to be true—that American companies operating abroad put their own interests above those of the United States, or that they place the interest of the United States first? Put their interests above those of the C.S., 66 percent; Place interests of U.S. first, 20 percent; and Don't know, 14 percent.
There has been interest expressed recently by some foreign companies in building plants here in the I'nited States. For example, a German automobile company might want to build a plant here to make its cars here instead of making them in Germany and shipping them here for sale. Generally speaking, do you think it should be our government's policy to encourage foreign companies having operations in the United States or to discourage them? Encourage, 50 percent; Discourage, 39 percent; and Don't know, 10 percent.
If more foreign companies did have operations in this country, do you think it would mean more jobs for Americans than there now are, or fewer jobs, or don't you think it would have any effect on the number of jobs for Americans? More, 60 percent; Fewer, 10 percent; No effect, 20 percent; and Don't know, 10 percent.
THE PETROLEUM INDUSTRY-A BACKGROUND
I should like to introduce into the Record a series of articles which indicate that in spite of the oil embargo in the Middle East and in spite of massive expropriation, oil companies are still more than willing to invest in the Middle East.
[From the Washington Post, Jan. 3, 1974] MULTIBILLION-DOLLAR TAX BENEFIT SEEN FOR BIG OIL FIRMS
(By Morton Mintz) The big international oil companies are getting multibillion-dollar tax breaks as a result of the unexpected sharp increases in the price of foreign oil, a public interest tax law firm said yesterday.
The companies pay royalties, taxes or both to Middle Eastern countries mainly, for the privilege of extracting petroleum from state-owned lands.
In the past, some of the Arab countries have helped out the oil companies with U.S. tax collectors by defining the charges as the firms desired--and they could do so again, Thomas F. Field of Tax Analysts and Advocates said in a telephone interview.
Under Internal Revenue Service rulings dating back to the late 1940s, the companies have been permitted to use the royalties as dollar-for-dollar offsets against their taxes in the United States. That is, if a firm paid $1 million in royalties abroad it would be allowed to pay $1 million less in taxes here.
At the same time, the tax laws allow taxes paid to other countries by all corporations also to be credited against American taxes.
The significance of the rulings and of the laws as they apply to the international oil companies increased enormously on Dec. 23, when the principal petroleum-producing countries in the Persian Gulf increased royalties and taxes by $3.95 per barrel—from $3.05 to $7.
The "posted" price, an artificial figure used as a basis for figuring royalties and taxes, increased to $11.65 a barrel, compared with $3.01 before the outbreak of hostilities with Israel in October, Production costs are about 12 cents a barrel.
The tax benefits to the oil companies cannot be precisely estimated because of many unknowns and because their effect is complicated by other special tax provisions for the oil industry, said Field, a former Treasury Department adviser-attorney in the Office of Legislative Counsel.
But he calculated that the companies in 1974 would have to pay at least $3 billion in federal taxes if the royalties and taxes paid to the oil kingdoms were to be treated as state income taxes are treated : as deductible business expenses.
Field's calculation was made in cooperation with other former Treasury specialists.
Martin Lobel, formerly an oil industry specialist for Sen. William Proxmire (D-Wis.), recalled that a big reason for giving the oil companies tax breaks was that domestic exploration, development and refinery construction were supposed to be stimulated. But he said the reverse has happened: the stimulus has been much more effective abroad than in the United States.
Now that Arab countries have embargoed shipments to the United States and may raise prices even more, the rationale for allowing foreign tax credits to the oil companies operating in the Persian Gulf becomes highly questionable, Lobel said in an interview.
The IRS, under State Department pressure, agreed in the late 1910s to treat royalties as taxes and did so with a series of private letter rulings, tax lawyer Field said. The argument made at the time by the companies was that royalties, no matter what they were called, were truly taxes. A public ruling to this effect was issued by the IRS about 20 years ago.
Field said the IRS is empowered to order a fact-finding investigation into the extent to which the royalties are used for the same governmental purposes as taxes. The agency is also empowered to modify the ruling.
The IRS is technically free to cancel the ruling altogether. Such an effort would be valnerable to a legal attack by the oil companies on the grounds that the ruling had acquired the force of law, Field said.
The artificial nature of “posted" prices for crude set off a clash between the IRS and the American firms operating in the Persian Gulf in the 1960s, when the agency filed a $1 billion tax lien—the largest in history-against them. The firms were understood to include Gulf, which has a joint venture with British Petroleum in Kuwait, and the owners of the Arabian-American Oil Co. (ARAMCO): Mobil, Standard of California, Standard of New Jersey (Exxon) and Texaco.
The IRS contended the $1 billion was owed because the companies had computed the oil depletion allowance, then 2742 percent, on inflated "posted” prices rather than on actual market prices. Field toid a congressional joint economic subcommittee two years ago that the IRS settled for 50 cents on the dollar. The agency says it is not permitted to discuss such negotiations involving any taxpayer.
In a related matter, Sen. Proxmire has been unable for four years to get the IRS to act on his request that it revoke a ruling which, Field says, has benefited only the owners of ARAMCO and BP's partner in Kuwait, Gulf.
The ruling, issued in 1956, made an exception to a 1954 regulation that prohibits corporations with a subsidiary enjoying a depletion allowance to pass the subsidiary's savings through to stockholders. The savings from the ruling are unknown. Proxmire in February, 1970, asked the IRS to revoke the ruling on the grounds that it was inconsistent with the regulations. “A study has been initiated,” the agency replied in April, 1970.
In September, 1971, Proxmire asked for a status report. The study is under "active consideration," Assistant Commissioner Harold Swartz replied two months later. "Every effort is being made to bring the study to an early conclusion."
In 1972, Gulf paid the lowest rate of federal taxes on net income before taxes, 1.2 per cent. Mobil paid 1.3 per cent, Exxon 6.5, Texaco 1.7, and Standard of California, 2.05.