SAN JOSE – The Semiconductor Industry Association today said that proposed changes to international tax rules such as weakening the deferral of US income taxes on the earnings of foreign subsidiaries of US companies could actually encourage the transfer of manufacturing and research and design activities offshore.

 

“While we applaud the Administration’s goal of encouraging investment in R&D and manufacturing operations in the United States, as evidenced by its proposal to make the research credit permanent, we are very concerned that the international tax proposals would have exactly the opposite result,” said SIA president George Scalise in a statement. “Nearly all of the countries with which America competes for investment either defer taxes on foreign earnings or do not tax them at all. Changes such as weakening the deferral of such taxes would place US companies with foreign subsidiaries at a competitive disadvantage.”

 

SIA noted that at present, the US does not tax the income generated by offshore subsidiaries of US companies until those earnings have been paid to the parent company, usually as a cash dividend. Deferral of such taxes helps to level the playing field for US companies in the global arena.

 

“Semiconductors are America’s second-largest export product,” Scalise said. “When American companies compete successfully in international markets, they also expand their domestic operations and create jobs in America. There are many other, better alternatives for encouraging job-creating investments in the US. Making it more expensive for US companies to compete in foreign markets is not one of them. The tax code is very complex and should not be changed in isolation, as the Administration has proposed."