Five Key Things That U.S. Tax Policy Analysts Should Know about Business Perspectives on Tax Issues and Its Policy Implications Annabelle Canning, Esq. Verizon Wireless Washington, D.C. 29 September 2006

OVERVIEW Businesses care about taxes that increase the cost of investment in business equipment and infrastructure making U.S. businesses less competitive in the global marketplace Businesses care about transaction taxes and (“user”) fees imposed on goods and services that affect demand for such goods and services and impact revenue growth Businesses care about simplification and efficiency in tax administration and are concerned with possible tax exposure under laws that are antiquated and difficult to administer Governments like to make businesses tax collectors – businesses should not be caught in the middle and liable financially for “administration” of ambiguous tax statutes Businesses care about tax policy because of uncertainties associated with many tax laws and requirements in Sarbanes- Oxley to disclose uncertain tax positions

Impact of High Taxes on Business and Infrastructure Investment Excessive taxation of equipment investments increase business costs for companies competing for capital in a global economy Tax Incentives for infrastructure investment by Info/tech businesses should not differ from incentives for manufacturing businesses Lower taxes on business investments result in an increased ability to grow businesses and invest in additional equipment and infrastructure

Impact of Inconsistent Imposition of Transaction Taxes Equity issues – Transaction taxes imposed at lower rate on broader base have less impact on consumer demand and less impact on revenue growth Fairness issues – differences in taxation should not influence consumer choice of goods/services and should not create winners and losers Need for transparency in imposition of certain state and local transaction taxes and “user” fees – government should not try to “hide” taxes

Impact of Antiquated Statutes and Decentralized Tax Systems Multiple levels of taxation with inconsistent definitions, inconsistent sourcing rules, hundreds of different tax bases and thousands of different tax jurisdictions are grossly inefficient. Many taxing jurisdictions oppose centralization and simplification of tax statutes due to concerns regarding loss of control Huge administrative costs associated with current system and lack of certainty in scope of taxes – waste of scarce resources for both industry and government

Businesses Are Frustrated by Lack of Certainty and Potential Tax Exposure Tax administrators tend to broadly interpret old statutes applicable to manufacturing economy – federal and state legislatures should update existing statutes for new information economy. Businesses should not be required to collect taxes without clear legislative intent to impose such taxes. Government and businesses must work together to reform tax systems to ensure the continued ability of U.S. businesses to compete in a global economy. Equity, fairness, transparency and certainty should form basis for legislative reform of tax systems.

Tax Policy Is Important to Business Because of Need for Certainty and Requirements of Sarbanes-Oxley Businesses need greater certainty regarding the applicability of tax statutes to avoid litigation and financial exposure under Sarbanes-Oxley. Businesses are required to disclose uncertain tax position to facilitate greater transparency. Increased clarity and transparency by government in the application of tax laws through tax reform and through clearer administration of tax laws would benefit business, government and the public.