News / Economy

    White House Criticizes Corporate Tax 'Inversions' as Squabble Escalates

    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.
    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.
    Jim Randle

    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

    Top US General: Turkish Media Report ‘Absurd'

    General Dunford rejects ‘irresponsible' claims of coup involvement by former four-star Army General Campbell, who led NATO forces in Afghanistan before retiring earlier this year

    Video Saving Ethiopian Children Thought to Be Cursed

    'Omo Child' looks at efforts of one African man to stop killings of ‘mingi’ children

    Protests Over Western Troops Threaten Libyan 'Unity' Government

    Fears mount that Islamist foes of ‘unity' government plan to declare a revolutionaries' council in Tripoli

    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.
    London’s Financial Crown at Risk as Rivals Eye Brexit Opportunitiesi
    X
    VOA News
    July 25, 2016 5:09 PM
    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Four Brother Goats Arrive in Brooklyn on a Mission

    While it's unusual to see farm animals in cities, it's become familiar for residents of Brooklyn, New York, to see a little herd of goats. Unlike gas-powered mowing equipment, goats remove invasive weeds quietly and without adding more pollution to the air. As Faiza Elmasry tells us, this is a pilot program and if it proves to be successful, the goat gardener program will be extended to other areas of New York. Faith Lapidus narrates.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9093
    JPY
    USD
    104.27
    GBP
    USD
    0.7612
    CAD
    USD
    1.3233
    INR
    USD
    67.329

    Rates may not be current.