72% of foreign firms beat U.S. income tax

April 10, 1992|By Knight-Ridder News Service

WASHINGTON >FZB — WASHINGTON -- Although their sales keep going up, 72 percent of foreign companies doing business in the United States pay no federal income taxes, the Internal Revenue Service told a congressional panel yesterday.

Foreign companies avoiding U.S. taxes may cost the Treasury $30 billion a year, House Ways and Means Committee investigators said.

Rep. J. J. "Jake" Pickle, D-Texas, chairman of the Ways and Means oversight subcommittee, said the problem is getting worse.

But IRS Commissioner Shirley Peterson said 59 percent of U.S. corporations also pay no income tax.

IRS officials cautioned that recent studies have shown there might be legitimate reasons -- such as higher start-up and investment costs -- for the lower profits typically reported by foreign businesses.

But critics say U.S.-based subsidiaries of foreign companies hide profits by paying inflated prices to their offshore parent companies.

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