April 5, 2016
WASHINGTON — President Obama hailed new Treasury Department rules cracking down on corporate tax inversions Tuesday, calling the practice of merging with a foreign company to escape U.S. taxes "one of the most insidious tax loopholes out there."
April 5, 2016
WASHINGTON — President Obama hailed new Treasury Department rules cracking down on corporate tax inversions Tuesday, calling the practice of merging with a foreign company to escape U.S. taxes "one of the most insidious tax loopholes out there."
President Barack Obama speaks about the new rules aimed at deterring tax inversions, Tuesday, April 5, 2016, in the Brady Press Briefing Room at the White House in Washington.
Highlighting the actions his administration is taking on overseas tax avoidance, Obama also made a connection to widespread revelations of tax evasion, money laundering and sanctions violations in the recently released Panama Papers.
"We've had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem. It’s not unique to other countries," Obama said. "A lot of it is legal, but that’s exactly the problem. It’s not that they’re breaking the laws, it’s that the laws are so poorly designed."
Corporations who can afford the accountants and lawyers to arrange the tax deals are "gaming the system," he said.
Obama called on Congress to overhaul the corporate tax system, saying the abuse of tax breaks was costing middle-class families.
"When companies exploit loopholes like this, it makes it harder to invest in the things that are going to make the American economy strong for generations to come. It sticks the rest of us with the tab,and it makes hardworking Americans feel like the deck is stacked against them,” he said.
The Treasury Department on Monday announced the latest in a series of new regulations designed to restrict the inversions, in which a U.S. company agrees to be acquired by a foreign company simply to avoid paying the higher corporate income tax rate in the United States. "They effectively renounce their citizenship. They declare that they're based somewhere else,” Obama said.
"It erodes the American tax base, undercuts businesses that play by the rules and ultimately leaves the middle class and small businesses to pay the tab," White House Press Secretary Josh Earnest said in a statement Monday. "Business decisions should be driven by genuine business strategies and economic efficiencies, not accounting gimmicks that game our broken tax system."
Obama decided to lead off a regular White House press briefing by Press Secretary Josh Earnest — "horning in on Josh's time just for a hot second" — to highlight the issue, saying it should be getting attention outside of the financial press.
The new Treasury regulations announced Monday are specifically aimed at what Treasury Secretary Jack Lew called "serial inverters."
"They acquire multiple U.S. firms in stock-based transactions over a short period of time. This increases their size and reduces the negative tax consequences of a subsequent inversion," Lew said. In other words, by structuring the acquisitions a certain way, a company can get around restrictions preventing a smaller foreign company from acquiring a larger American one.
The new rule creates a three-year window during which a foreign company would not be allowed to count newly acquired companies toward its foreign ownership percentage.
But Obama also acknowledged that his administration is limited in how far it can go without new legislation from Congress. "I want to be clear, while the Treasury Department actions will make it more difficult and less lucrative, only Congress can close it for good," he said.
Rep. Kevin Brady, R-Texas, the chairman of the tax-writing House Ways and Means Committee, said the Treasury actions were "punitive regulations that will make it even harder for American companies to compete."
Courtesy:
