Tuesday, June 18, 2002

Study Faults U.S. Regulators in Aftermath of Power Crisis More than a year after California endured power shortages and soaring energy prices, the nation's energy regulators are still not up to the task of protecting consumers and ensuring that electricity is sold at reasonable rates, a Congressional study to be made public on Tuesday has concluded. The study by the General Accounting Office, an investigative arm of Congress, says the Federal Energy Regulatory Commission is hobbled by antiquated procedures, legislation and perhaps a mind-set more suited to the old days when energy producers were regulated monopolies. "FERC has not yet adequately revised its regulatory and oversight approach to respond to the transition to competitive energy markets," the report states. While the energy agency recognizes that it must "fundamentally change how it does business," it has been unable to transform itself, partly because of leadership changes and high staff turnover created by higher salaries in private business, the report said. Moreover, the study found, the agency "lacks adequate enforcement `bite' to deter anticompetitive behavior or other violations of market rules" because it is simply unable to impose meaningful civil penalties. Without stronger enforcement power, the report says, the agency will not be able to deter anticompetitive behavior or outright violations of market rules. http://www.nytimes.com/2002/06/18/business/18FERC.html

G.O.P. Is Moving to Slow Action on Tax Loophole Republican leaders in Congress are using procedural tactics like walking out of committee hearings to keep Congress from voting on measures to close the so-called Bermuda loophole in the federal tax code, measures that would almost certainly pass overwhelmingly if given the chance. The loophole allows big companies to pretend legally that they are based offshore (Bermuda has been the country of choice) and then filter profits through a third country (most often Barbados), avoiding American income taxes. The administration and the Republican leaders have said the loophole should be closed but have emphasized that flawed tax laws are forcing companies to make the Bermuda move. Representative Lloyd Doggett, Democrat of Texas, will try to change the law again today with a measure that would forbid companies to use the loophole unless their shares actually trade on an exchange in the tax haven country or most of their stock is owned by people living there. The proposal would close the loophole for companies like Tyco International, nominally a conglomerate based in Bermuda but which manages its operations from Exeter, N.H. There would be no effect on legitimate multinational corporations, like DaimlerChrysler, that have not used a haven to avoid American taxes. "It seems eminently fair to require that people in your own country be the ones to benefit from the tax treaty," Mr. Doggett said. "We did not negotiate these treaties so that American companies could stop paying taxes on profits earned in the United States, but to benefit commerce between our country and the tax treaty countries." "We cannot let these fair-weather friends choose when to wrap themselves in the flag and when, renouncing the flag, they will wrap themselves in a tax treaty," Mr. Doggett said. "Enjoying the rights means sharing the responsibility." The determination of Republicans to not allow a vote on closing the Bermuda loophole has been seen in both the Senate and House in recent weeks. Republicans left a Senate Finance Committee meeting last Thursday, ending the meeting for lack of a quorum, shortly before a vote on a bill by Max Baucus, Democrat of Montana, and Charles E. Grassley, Republican of Iowa, the two senior members of the committee, to close the loophole for new companies. Aides to both senators said that they were confident that the bill would pass by a wide margin if brought up for a vote on the Senate floor. The committee is to take up the bill again tomorrow. Three weeks ago, Republican leaders in the House cut off a vote on making permanent partial relief from the so-called marriage penalty to avoid allowing Democrats to bring up an amendment closing the Bermuda deals. The marriage penalty occurs when a working married couple pays more in taxes than if they lived together without being married. The Bermuda deals, according to the Treasury, reveal deep flaws in the system for taxing multinational companies. The administration has warned that a quick remedy, like the moratoriums proposed in the House or the denial of tax benefits in the bill by Mr. Baucus and Mr. Grassley, might make American multinational corporations vulnerable to takeovers by foreign companies or could damage their global competitiveness. Still, were a bill creating a moratorium on the Bermuda deals to come up for a vote in the House while a study was under way, it would easily win 300 votes, far more than needed for passage, said Representatives Jim McCrery, a Republican from Louisiana, who is on the House Ways and Means Committee. Mr. McCrery said that he favored a comprehensive review of the tax regime for international companies. http://www.nytimes.com/2002/06/18/business/18TAX.html