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Therefore, to promote fiscal autonomy of the
possessions, it is important to permit each possession
to develop a tax system that is suited to its own
revenue needs and administrative resources. It is also
important to coordinate the possessions’ tax systems
with the U.S. tax system to provide certainty and
minimize the potential for abuse. [S. Rept. 99-313, at
478 (1986), 1986-3 C.B. (Vol. 3) 1, 478.]
To accomplish these goals, Congress gave extraordinary power to
the Secretary to negotiate an implementing agreement between the
United States and American Samoa, and to prescribe regulations
for purposes of defining the boundaries of American Samoa’s tax
authority. Id. at 479-481.
Congress intended that the Secretary define “effectively
connected income” in a manner that would prevent tax avoidance.
Id. at 481; H. Conf. Rept. 99-841 (Vol. II), at II-680 (1986),
1986-3 C.B. (Vol. 4) 1, 680. The legislative history identifies
situations where taxpayers with assets having built-in gain move
to a U.S. possession, sell their assets, and avoid tax on the
gain. S. Rept. 99-313, supra, 1986-3 C.B. (Vol. 3) at 481.
These tax avoidance techniques are an illustrative, rather than
exhaustive, delineation of machinations Congress wanted the
Secretary to foreclose. The Secretary was given this
responsibility because he, rather than Congress or this Court,
has experience with the specific problem and the expertise to
solve it.
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