The Obama administration urged Congress on Wednesday to act to stem what it described as a growing trend in which U.S. companies move their headquarters abroad to reduce their U.S. tax bills.
"Congress should enact legislation immediately," Treasury Secretary Jack Lew told a business conference in New York hosted by cable television channel CNBC.
Washington is concerned by a wave of mergers between U.S. and foreign companies that will drag on future revenue flowing into U.S. coffers.
"We should have some economic patriotism here," Lew said.
Under these so-called "inversion" deals, companies like drugmaker Pfizer Inc. have proposed mergers with foreign rivals that would involve shifting corporate headquarters outside U.S. jurisdiction. This helps reduce the companies' U.S. tax obligations.
Lew said the administration lacks the legal tools to stop this trend and said the best solution would be for lawmakers to enact broad reforms of the business tax code.
Any measures passed by Congress to stem inversion deals should be enacted retroactively, Lew said, to keep businesses from rushing to close deals before legislation is approved.
"It is important that this issue be addressed because we're seeing an uptick in activity, of greater interest of companies moving overseas," Lew said.
Lew wrote lawmakers on Tuesday urging them to pass legislation to "prevent companies from effectively renouncing their citizenship to get out of paying taxes," according to a copy of the letter obtained by Reuters.
© 2016 Thomson/Reuters. All rights reserved.