For
Immediate Release (attachment)
August 27, 2002
Contact: Channell Barbour (502) 564-2611/ Jason Lumia (703) 307-7250
Patton
discusses downward trend in corporate tax receipts
NEW
ORLEANS - During the conclusion of the 68th Southern Governor’s
Association annual meeting, Gov. Paul Patton discussed, with governors in
attendance today, the continuous downward trend in corporate tax receipts, as
well as accountability measures to reduce corporate tax avoidance.
Governors expressed
their concerns with the use of international and domestic tax shelters. In
recent years business profits have increased while state corporate income and
other business activity tax receipts have continued to decline. The recent rise
in business sheltering practices only compounds longstanding problems of
ensuring proper accountability of reporting corporate income.
The Southern
Governors are calling upon the National Governors Association to create a task
force to address corporate income and other business tax avoidance practices
that undermine the equity, integrity, and viability of state business tax
systems, and compromise the ability of states to provide vital services to the
public.
“The uncertainty
and volatility of corporate income and other business tax receipts in many
states endangers the financing of education, transportation, and other essential
services in our communities,” Gov. Patton said.
In a letter to the
association, the governors are asking that the task force report their findings
within 6 months.
-30-
August
27, 2002
Dr.
Raymond C. Scheppach
Executive Director
National Governors Association
444 North Capitol Street, N.W.
Suite 267
Washington, D.C. 20001
Dear
Ray:
During
the 68th annual meeting of the Southern Governors’ Association (SGA)
concluding today in New Orleans, Louisiana, an important topic of conversation
among the governors in attendance has been state fiscal situations.
In particular, the governors have discussed the continuous downward trend
in corporate tax receipts and measures to reduce corporate tax avoidance.
As
all governors are fully aware, in recent years business profits have increased
while state corporate income and other business activity tax receipts have
continued to decline. In fact,
state corporate income tax revenue has decreased from nearly 9 percent of total
state tax revenue in the late 1980s to just over 6 percent of total state tax
revenue today. The uncertainty and
volatility of corporate income and other business tax receipts in many states
endangers the financing of education, transportation, and other essential
services in our communities.
Governors
are equally concerned about the use of international and domestic tax shelters.
National accounting firms and corporate entities need to be held accountable for
any actions that compromise the confidence of consumers and investors,
negatively affect U.S. and world financial markets, and subject consumers and
investors to severe financial liabilities.
The recent rise in business tax sheltering practices only compounds
long-standing problems of ensuring proper accountability of reporting corporate
income.
Corporate
tax abuses that have directly and indirectly impacted their state corporate
income and other business tax liabilities have been a topic of discussion not
only at our meeting in New Orleans, but also at numerous other state tax
conferences and meetings. Discussions
among state financial and revenue officials have
included items such as royalty payments, allocation and apportionment, transfer
pricing, limited liability entities, separate entity filings and dividends
received deduction manipulation.
However,
while states have worked to create many national uniform standards over the
years, they have not yet formally resolved any issues addressing corporate tax
practices and the erosion of state corporate income and other business tax
revenue.
As
such, on behalf of our fellow SGA colleagues, we call on the National Governors
Association to create a task force to address corporate income and other
business tax avoidance practices and help governors fully understand the extent,
nature, and ramifications of this problem. We believe that the task force should be charged with
developing a strategy for states to develop model legislation or guidelines,
participate in joint audits, allow for the exchange of taxpayer information and
provide a method for sharing information regarding developments of inappropriate
taxpayer behavior. We would request
that the task force report their findings to the governors within 6 months.
Corporate
tax abuses not only adversely affect the economy, they undermine the equity,
integrity and viability of state business tax systems and compromise the ability
of states to provide vital services to the public.
It is critical that states enter into a
cooperative effort to reduce fiscal exposure to the collective tax base of all
50 states to ensure that we may continue to meet our communities’ growing
education, transportation and public safety needs. We look forward to taking this necessary step.
Sincerely,
_____________________________
_______________________________
Don Siegelman, Alabama
Mike
Huckabee, Arkansas
_____________________________
_______________________________
Roy E. Barnes, Georgia
Paul
E. Patton, Kentucky
_____________________________
_______________________________
M.J. “Mike” Foster, Jr., Louisiana
Ronnie Musgrove, Mississippi
_____________________________
_______________________________
Bob Holden, Missouri
Don Sundquist Tennessee
_____________________________
_______________________________
Mark Warner, Virginia
Bob Wise, West Virginia
cc:
NGA Executive Committee Members