News / Economy

White House Criticizes Corporate Tax 'Inversions' as Squabble Escalates

President Barack Obama speaks about the economy and requests
President Barack Obama speaks about the economy and requests "economic patriotism" from American corporations that seek overseas mergers to avoid U.S. taxes, at the Los Angeles Trade-Technical College in Los Angeles, July 24, 2014.

The White House says it has no timeline for executive action on so-called corporate inversion deals, in which some American companies are buying foreign companies to reincorporate abroad and pay a lower tax rate.

Billions of dollars are at stake in the squabble over a tax tactic called “inversion,” and President Barack Obama believes is not fair to their American competitors or the hard-working American taxpayer.

"They [these large companies] don’t want to give up the best universities and the best military and all the advantages of operating in the United States. They just don’t want to pay for it," said the president.

The practice is legal, however, and it brings added income for the companies, the bankers and others involved in the structure.

Increased maneuvering

Many large U.S.-based companies, including drug makers and a fast food giant, already have moved or are considering moving their legal corporate residence from the United States to other nations with lower corporate tax rates.

The president has said the growing trend is hurting the economy. Others say a more sensible U.S. tax system, though, would solve this and other problems.

White House press secretary Josh Earnest said Tuesday that if Congress refuses to act, the Obama administration is looking at possible options to respond to the problem of "corporate deserters."

The White House's comments on inversion deals come ahead of Treasury Secretary Jacob Lew’s speech Monday, September 8 about corporate inversions deals.

Tax structure

Northwood University economics professor Tom Nash said the complicated maneuver is driven by the 35 percent U.S. federal tax rate on corporate earnings, a bill that can be raised even higher by state taxes. “We are the highest corporate tax rate system in the industrialized world,” he said.

Nash said unlike most other developed nations, Washington also taxes corporate income earned outside the United States. He said high U. S. taxes also slow investment at home by major companies. When foreign firms have lower expenses, they can offer lower prices than American firms. That hurts the 25 percent of the U.S. economy tied to exports.

Some experts suggest the administration and Treasury could slow the current pace of corporate inversion deals by counting a company’s U.S.-issued debt as equity. The change would make it harder for companies to achieve the necessary majority foreign equity ownership required for reincorporation abroad in an inversion deal.

U.S. Senator Bernie Sanders, an Independent from Vermont, also has said companies that do inversion deals should not be allowed to compete for federal contracts.

Tax reform

Some Republicans and former U.S. President Bill Clinton say the inversion deals are a symptom of the larger problem, which requires comprehensive tax reform to resolve. Obama has agreed to discuss major tax reform.

American Enterprise Institute scholar James Pethokoukis said political bickering will block fundamental tax reform for a while, even though there is wide agreement among economists and members of Congress that U. S. tax laws need change.  

“That’s probably [tax reform] not going to happen between now and the end of the year. Not much is going to happen between now and the end of the year, so it becomes kind of a 2015 or 2016 thing,” said Pethokoukis.

 In the meantime, Pethokoukis said the president may use executive actions to try to make it harder for companies to use inversion to avoid taxes, but Pethokoukis thinks that will have a limited impact.

 

 

 

You May Like

Tired of Waiting, South Africans Demand Change ‘Now’

With chronic poverty and lack of basic services largely fueling recent xenophobic attacks, many in Rainbow Nation say it’s time for government to act More

Challenges Ahead for China's Development Plans in Pakistan

Planned $46 billion in energy and infrastructure investments in Pakistan are aimed at transforming the country into a regional hub for trade and investment More

'Forbidden City' Revisits Little Known Era of Asian-American Entertainment

Little-known chapter of entertainment history captured in 80s documentary is revisited in new digitally remastered format and book More

This forum has been closed.
Comment Sorting
Comments
     
by: P from: USA
September 06, 2014 9:20 AM
15% seems way more reasonable, it allows companies to pay their workers more, thereby stimulating the economy, furthermore, protect our companies at home by tariffs, and higher tax rates for foreign companies! They do it to us!

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Cinema That Crosses Borders Showcased at Tribeca Film Festivali
X
April 24, 2015 4:09 AM
Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.
Video

Video Keeping Washington Airspace Safe Is Tall Order

Being the home of all three branches of the U.S. federal government makes Washington, D.C. the prime target for those who want to make their messages and ideas heard. Unfortunately, many of them choose to deliver them in unorthodox ways, including from the air, as a recent incident clearly showed involving a gyrocopter landing on the Capitol’s West Lawn. VOA's George Putic has more.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.
Video

Video Hope, Prayer Enter Fight Against S. Africa Xenophobia

South Africa has been swept by disturbing attacks on foreign nationals. Some blame the attacks on a legacy of colonialism, while others say the economy is to blame. Whatever the cause, ordinary South Africans - and South African residents from around the world - say they're praying for the siege of violence to end. Anita Powell reports from Johannesburg.

VOA Blogs

World Currencies

EUR
USD
0.9238
JPY
USD
119.51
GBP
USD
0.6614
CAD
USD
1.2119
INR
USD
63.562

Rates may not be current.