Obama Wants Limits on US Company Mergers Abroad
2014-07-24 10:01:15.430 GMT
Los Angeles (AP) -- President Barack Obama is tapping into
growing misgivings about tax-driven overseas mergers by U.S.
corporations, issuing a new call to end the practice quickly and
questioning the patriotism and citizenship of those companies.
The push comes amid a developing trend by companies to
reorganize with foreign entities partly to reduce their tax
payments in the U.S.
But Obama's election-year drive also coincides with
increased attention to the issue by congressional Democrats, who
are seeking to draw contrasts with Republicans and to portray
them as too corporate-friendly.
Obama was scheduled to address the issue in remarks
Thursday at a technical college in Los Angeles. Though he
included a proposal to rein in such mergers and acquisitions in
his 2015 budget, this marks a new, more aggressive focus on the
issue by the president.
His administration began to ramp up attention to these
transactions last week with a letter from Treasury Secretary
Jacob Lew to House and Senate leaders. Lew said such deals,
known as "inversions," ''hollow out the U.S. corporate income
tax base."
In his remarks, Obama was expected to call for "economic
patriotism." White House officials said Obama would declare that
those companies that engage in inversions are in effect
renouncing their U.S. citizenship in order to shift their
profits overseas.
Obama is urging Congress to enact legislation that is
retroactive to May, arguing that will stop companies from
rushing into deals to avoid the law.
Republicans and some Democrats, however, prefer to make
those changes as part of a comprehensive overhaul of the
corporate tax code that would also lower corporate tax rates and
reduce the incentive for companies to seek out countries with
lower levels of taxation.
Under such inversion deals, U.S.-based, multinational
companies can lower their tax bills in part by combining with a
foreign company and reorganizing in a country with a lower tax
rate. The United States has a 35 percent income tax rate, the
highest in the industrialized world, and it also taxes income
earned overseas and then brought home.
Republicans such as Sen. Orrin Hatch of Utah say the U.S.
first must change its policy of taxing income earned abroad.
Under current law, shareholders of a U.S. company that
merged with an offshore entity would have to own less than 80
percent of the combined entity to take advantage of a lower
foreign tax rate. Obama's budget proposes slashing that cutoff
to 50 percent.
Administration officials estimate the deals, if allowed to
continue, will cost the U.S. Treasury $17 billion in lost
revenue over the next decade.
"We should not be providing support for corporations that
seek to shift their profits overseas to avoid paying their fair
share of taxes," Lew said in the letter.
-0- Jul/24/2014 10:01 GMT
2014-07-24 10:01:15.430 GMT
Los Angeles (AP) -- President Barack Obama is tapping into
growing misgivings about tax-driven overseas mergers by U.S.
corporations, issuing a new call to end the practice quickly and
questioning the patriotism and citizenship of those companies.
The push comes amid a developing trend by companies to
reorganize with foreign entities partly to reduce their tax
payments in the U.S.
But Obama's election-year drive also coincides with
increased attention to the issue by congressional Democrats, who
are seeking to draw contrasts with Republicans and to portray
them as too corporate-friendly.
Obama was scheduled to address the issue in remarks
Thursday at a technical college in Los Angeles. Though he
included a proposal to rein in such mergers and acquisitions in
his 2015 budget, this marks a new, more aggressive focus on the
issue by the president.
His administration began to ramp up attention to these
transactions last week with a letter from Treasury Secretary
Jacob Lew to House and Senate leaders. Lew said such deals,
known as "inversions," ''hollow out the U.S. corporate income
tax base."
In his remarks, Obama was expected to call for "economic
patriotism." White House officials said Obama would declare that
those companies that engage in inversions are in effect
renouncing their U.S. citizenship in order to shift their
profits overseas.
Obama is urging Congress to enact legislation that is
retroactive to May, arguing that will stop companies from
rushing into deals to avoid the law.
Republicans and some Democrats, however, prefer to make
those changes as part of a comprehensive overhaul of the
corporate tax code that would also lower corporate tax rates and
reduce the incentive for companies to seek out countries with
lower levels of taxation.
Under such inversion deals, U.S.-based, multinational
companies can lower their tax bills in part by combining with a
foreign company and reorganizing in a country with a lower tax
rate. The United States has a 35 percent income tax rate, the
highest in the industrialized world, and it also taxes income
earned overseas and then brought home.
Republicans such as Sen. Orrin Hatch of Utah say the U.S.
first must change its policy of taxing income earned abroad.
Under current law, shareholders of a U.S. company that
merged with an offshore entity would have to own less than 80
percent of the combined entity to take advantage of a lower
foreign tax rate. Obama's budget proposes slashing that cutoff
to 50 percent.
Administration officials estimate the deals, if allowed to
continue, will cost the U.S. Treasury $17 billion in lost
revenue over the next decade.
"We should not be providing support for corporations that
seek to shift their profits overseas to avoid paying their fair
share of taxes," Lew said in the letter.
-0- Jul/24/2014 10:01 GMT