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PAD-80-3 1 (1980-01-18)

handle is hein.gao/gaobabbbj0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 PROGIIAM ANALYSIS8 DIVISLONJ B-197335 The Honorable Sam M1. Gibbons Chairman, Subcommittee on Oversight ommittee on Ways and Means House of Representatives 113386 Dear Mr. Chairman: '_ you r quested in your letter of October 19, 1979, we have/review the Department of Treasury report concerning the L-ffect of the investment tax credit on competition in the automobile industry. It is our opinion that the report is responsive to your request and that the analysis it contains is an adequate effort to use data from company tax returns to clarify the effect of the credit on competition. The fact that its conclusions are so guarded reflects the intrinsic difficulty of the subject material. Notwithstanding this difficulty, we believe that if more time and effort were given to the task, potentially useful analyses of data from tax returns, supplemented by public data, could be conducted. Although there is no certainty that the results would be conclusive, such analyses might help elucidate the impact of the investment tax credit on industry competition. The unique structure of the automobile industry and the recent financial problems of the Chrysler Corporation, however, caution against generalizing any find- ings to other industries. The soundest way to determine what effect the investment tax credit has had on competition generally may be to examine several other industries. General Observations On the surface, one cannot tell whether the investment tax credit stimulates or depresses competition. We do know that the benefits-of the credit are not equally available to all firms. Firms that have no tax liability or too small a liability to take advantage of the full credit to which they are entitled benefit less from the credit than firms with larger liabilities. At l.east one automobile manufacturer has recently been unable to claim its full credit. In general, ....... cu &PAD-80-3 LZ. 4 TOiY CE,T

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