Tags: obama | corporate | inversions | executive | action

Obama Uses Executive Action to Block 'Corporate Inversions'

By    |   Tuesday, 23 Sep 2014 06:53 AM

The Treasury Department has announced a series of restrictions intended to remove incentives for U.S. companies to relocate abroad in order to reduce their taxes, The New York Times  reported.

The administration acted after it became clear that any legislative action was not in the cards until after the November elections.

Scores of U.S. firms have merged with foreign companies in low tax countries to reduce their tax burden in a maneuver known as corporate inversions. "For some companies considering deals, today's action will mean that inversions no longer make economic sense," Treasury Secretary Jacob Lew said.

"While there's no substitute for congressional action, my administration will act wherever we can to protect the progress the American people have worked so hard to bring about," President Barack Obama said of the executive actions, the Times reported.

Lew said that while corporate inversions may be legal, they are wrong. Obama has said such companies lack "economic patriotism," according to the Times.

The rules kick-in Monday and will not affect companies that already relocated.

New York Democratic Senator Charles Schumer said the administration went as far as it legally could. "Certainly they made a good effort, but what this administrative action shows is that the only real way to stop inversions is legislative," said Schumer.

The complex guidelines offer an array of rules intended to neutralize loopholes— such as manipulating ownership percentages between related firms— that had allowed American parent companies to shift revenues to foreign subsidiaries in order to avoid paying U.S. taxes.

Companies will still be able to take interest deductions that, in point of fact, make it possible to transfer income to low-tax countries, The Hill reported.

Sen. Ron Wyden, D.-Ore., chairman of the Finance Committee, said only Congress has the necessary tools to stop inversions. "Congress should move a bipartisan bill in the lame-duck session as an immediate action to address inversions, to create incentives so businesses will remain in or move to the U.S., and to use that legislation as a springboard to comprehensive tax reform," Wyden said, the Times reported.

The ranking Republican on the committee Sen. Orrin Hatch of Utah said he would cooperate.

"In the end, any solution that permanently addresses inversions must be legislated by Congress," he said, according to the Times.

"The answer is to simplify and reform our broken tax code to bring jobs home – and help grow our economy and create even more American jobs," said House Speaker John Boehner through a spokesman, according to the Hill.

Democrats have blasted Burger King and other companies that reincorporated abroad, the Hill reported. Sometime Obama economic adviser billionaire Warren Buffett, however, has backed the Burger King merger with the Canadian Tim Hortons chain saying it made good business sense.

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The Treasury Department has announced a series of restrictions intended to remove incentives for U.S. companies to relocate abroad in order to reduce their taxes, The New York Times reported. The administration acted after it became clear that any legislative action was...
obama, corporate, inversions, executive, action
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2014-53-23
Tuesday, 23 Sep 2014 06:53 AM
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