Opening Statement of the Hon. Bill Thomas, a Representative in
Congress from the State of California, and Chairman, Committee on Ways and Means

Hearing on Corporate Inversions

June 6, 2002

During recent months, many U.S. companies have announced that they will move their principle place of incorporation to a foreign jurisdiction, including such low-tax countries as Bermuda.  Many companies have already taken this step.  Today, the Committee on Ways and Means will examine the causes behind reincorporations.  We will also explore policy options to reduce the incentive for inversions while also enhancing U.S. international competitiveness.

It is worth noting that a Republican Ways and Means Member, Rep. Scott McInnis, introduced one of the first legislative fixes for inversions.   He introduced H.R.  2857 on March 6, 2002.    Most recently, Rep. Nancy Johnson - another Republican Committee Member - offered a moratorium bill, H.R. 4756 on May 16, 2002.   Her moratorium is an appropriate step in the absence of a legislative solution.  However, I want to be clear.   This Chairman plans to introduce and move a thoughtful, reasonable approach to address corporate inversions, and I plan to do so sooner rather than later.   Today’s hearing will help us gather needed information to craft such a product.

Those of us who represent States with high taxes properly blame state legislatures when companies flee to low-tax jurisdictions in surrounding states.   We can’t ignore that the U.S. tax code creates the same phenomenon internationally.  Corporate inversions are a symptom of a larger underlying problem with our tax code.  The corporate tax code has driven many companies to move their mailboxes to other jurisdictions.   

What changes must we make to keep America’s competitive edge?  Competitiveness is not easily assessed, as our extensive examination of the Foreign Sales Corporations has shown.   The U.S. has some of the world’s most complicated rules on international taxation.  These rules originate, in part, from a misguided belief that we can keep capital in the United States through restrictive tax regimes.  Worse still, the system we impose on American-based firms provides advantages to foreign companies that want to buy up American companies.

Today, we will first hear from the Treasury Department, which recently released a preliminary report on inversions.  They are now developing options for addressing the competitiveness issues that inversions signal.  To get a practical, real-world perspective, we will also hear from private sector witnesses about how our tax system influences business decisions.

This hearing is an opportunity for us to work together to develop modern tax systems suited to a growing global economy.  I hope all of us will put aside shrill rhetoric and work in a cooperative effort to keep our economy as competitive as possible so that we can preserve American jobs.   Before introducing our witnesses, I yield to Mr. Rangel from New York.