Evening star., 1949-09-26

Sought 10 Stimulate
Investment Abroad
President Truman wants the
present session Of Congress to
start action on his plan for build
ing up undeveloped areas Of the
world.
This was made known today as
State Department officials said
the administration would urge
legislation liberalizing tax laws on
income earned in foreign countries
to stimulate private investment
abroad.
President Truman first ad-
vanced the development idea in
Point Four" Of his inaugural ad-
dress as he laid down blueprint
for STRENGTHENING the world econ
omy, with particular reference to
Latin America, Africa and Asia.
Technical Aid Requested. =
He followed this up in June with
a request for an appropriation of
$45. 100000 to finance technical
assistance to the undeveloped
areas, and for authority for the
Export-Import Bank to guarantee
private investments abroad.
1t is on these two points the
President is hopeful for action.
State Department officials believe
that the guarantees and the tech
nical assistance program would
themselves make foreign invest
ment more attractive.
However. in order to obtain
maximum stimulation. OF capital
outflow they are also prepared to
advocate the tax law change.
These would give special advan-
tages to corporations and indiv-
uals with foreign operations.
The five changes which the ad-
ministration will propose are
these:
]. Easing Of the limitations now
imposed on the credit against Uni
ted States tax liability which is
allowed for taxes paid to foreign
countries. The limitations are de-
singed to prevent taxes abroad
from reducing the Federal tax
yield on income received from
sources In the United States. Off,
cials said that to stimulate for
eign investments greater credits
should be allowed in cases where
some foreign activities result in
net profits and others in net losses.
2. Permission for an American
corporation which holds less than
majority control of a foreign cor
poration to receive credit for taxes
paid by the foreign corporation.
At present the credit is allowed
only when the American corpora
ton holds majority control of the
foreign corporation.
3. Broadening Of provisions
which exempt from income tax
u. S. citizens living
abroad. A citizen must now be
out Of the country for the entire
taxable year as a bonafide resident
OF . foreign country before his
earned income Is exempted. The
administration would like to
broaden the exemption to enable
citizens who subsequently establish
residence abroad to qualify retro
actively for the exemption Of in
come earned during their first in
complete year abroad. This change
Is designed to encourage Ameri-
cans to take a greater interest in
working abroad.
4. Provision to allow credit for
foreign death duties paid on prop
erty owned by United States citi-
Gems in foreign countries. The
present Federal estate tax makes
no such allowance.
5. Permission for domestic cor
porations to treat income from
their branches and agencies
abroad in the same manner that
income from foreign subsidiaries
is now treated. Income from sub
salaries is not taxed until sent to
the United States but the same
rule does not presently apply to
the income derived from branches
and agencies Of domestic corpora
tions.