Soloman talks tax reform and global trends

Published: March 22nd, 2010

Category: Events, News

They say that the only two sure things in life are death and taxes, but while taxes may be inevitable, the way we are taxed is quite fluid. Few people in this country know this better than Eric Solomon, who spoke to the Graduate Tax program on Friday about tax reform and global trends.

Solomon is currently the director of Ernst & Young’s National Tax Department, a post he took up in 2009. For a decade before then, Solomon worked for the Treasury Department, most recently serving as the assistant secretary for tax policy.

The first subject of Solomon’s presentation, global trends in taxation, may seem puzzling to some. Why should one country care how others tax their citizens? Solomon answered that question at the outset, saying, “I submit that we have to recognize, now, that we are inextricably interconnected to the rest of the world.”

As Solomon presented these trends, such as the globalization of economies and international cooperation, he pointed out that these trends were in response to the problems that countries around the world are facing. As transactions become more complicated, governments must try to keep up, and as revenues shrink, enforcement rises.

Solomon said that in a world where a company can pack up and move its operations overseas, a country must acknowledge the impact that its tax code can have on such decisions. “We have to understand that our tax system is relevant to business decisions made in this country,” he said.

At the same time as countries change their tax codes to create attractive business environments, countries are also working with one another in the enforcement side of the equation. Countries are sharing information with one another, signing treaties, and even joint-auditing. Solomon said that the U.S. and UK are looking for a volunteer to be joint-audited and joked, “If you know a company that wants to be joint-audited by the UK and U.S., let me know.”

While these factors make tax legislation an important subject every year, Solomon pointed out that 2010 will be a particular important year. Solomon explained that there are many code provisions that expire every year, and must be reinserted in order to take effect. However, as Congress has stagnated under the load of the aforementioned controversies, many of these provisions have not been reinserted, with the estate tax being the one that has generated the most attention.

Even with all of this on the horizon, Solomon pointed out that “tax reform is not at the front of everybody’s mind.” With highly controversial subjects like health care, carbon emissions, and unemployment being debated every day, a technical subject like tax reform hasn’t seen a great deal of discussion.

Revenue neutrality has been a focal point for much of the discussion on tax reform that has taken place, but Solomon doubts that it will be much of an issue when tax reform is finally taken up by Congress. The reason, he explained, was that, at that point, the country is almost sure to need more revenue. But still, Solomon only offered one promise on the issue, that there would be individual winners and losers.

“It’s not going to be revenue neutral on an individual basis,” he said,” I can assure you of that.”