Tax on International Profits Will Hurt Jobs and Competitiveness, Multinationals Tell NYSE Euronext Chief

Excerpt from an interview in the new BusinessWeek:

MARIA BARTIROMO: The proposals coming out of the Obama Administration are the talk of the business world, particularly the tax on international profits. What are you hearing about this new proposal to tax profits differently?

DUNCAN L. NIEDERAUER: I was in Texas and California in recent weeks and probably met with 100 company executives. The reactions among many could be summarized in the following two observations. No. 1: Doesn’t the Obama Administration recognize that most [big] U.S. companies are multinationals that happen to be headquartered in the U.S.? No. 2: Doesn’t the Obama Administration appreciate that a multinational headquartered in the U.S. doing business overseas does not mean the company is evading taxes? If somebody who’s operating in the U.S. has an overseas business with a mailbox in a tax haven then obviously that is bad behavior and should be dealt with. Companies that have overseas businesses in legitimate tax jurisdictions, who pay taxes in those jurisdictions on the business they do there, that is not in the same category. And what I’m hearing from executives is that this proposal suggests we’re all behaving badly, when, in fact, I would imagine very few of us are.

What’s the reaction going to be?
The initial sense we’re getting—and we plan to survey our listed companies in the coming days to get a more accurate read—is that these companies will find ways to cut expenses to compensate for this increase in taxation, and that will probably be largely in the form of jobs. And companies might continue to be headquartered in the U.S. but would perhaps incorporate in another G-20 jurisdiction.

Besides job cuts, are there other implications?
As a student of the market, you’ll appreciate this. If $210 billion is coming out of everybody’s aftertax net incomes over the next decade, put whatever multiple you want on that, and that would tell you trillions of dollars should rationally come out of equity market capitalization were this to go forward. The other implication is probably it’s got to have a negative impact on our ability to compete because it almost encourages you to be a localized company, not a multinational.