Treasury Secretary Jacob Lew has written lawmakers urging them to penalize U.S. companies that reincorporate overseas to reduce their tax burden, The Wall Street Journal reported.
Some 50 US multinationals have merged with foreign companies in low tax countries to reduce their tax burden in the past decade. The latest two companies to make the move are AbbVie Inc. and Mylan Inc. both in the pharmaceutical business which did so this week.
Congress has been unable to pass a comprehensive overhaul of the tax-code that would make the U.S. system more pro-business.
Congressional paralysis appears to have served as an added impetus for firms shifting overseas. Some companies have expedited their merger deals out of concern that the Obama administration would take steps to punish inversions. In drafting business arrangements, companies are protecting themselves should the tax benefits afforded by the mergers be abruptly removed by any new legislation.
While the White House wants Congress to pursue tax reform legislation, Lew urged interim measures
that would promptly put an end to "this abuse of our tax system."
Many in Congress are wary of taking precipitous action so as not to make the situation worse. Republicans and some key Democrats tend to support limiting inversions through a comprehensive tax reform.
Utah Republican Sen. Orrin Hatch, who serves on the Senate Finance Committee, said, "I don't want to be part of legislation that ramps up the competitive disadvantage of being a U.S.-based company or makes U.S.-based companies more attractive targets for foreign takeovers," the Journal reported.
Oregon Democratic Rep. Ron Wyden, chairman of the Finance Committee is on record as wanting to close the inversion "loophole" and would like to see the inversions retroactively undone as a outcome of comprehensive tax reform legislation.
Lew said even as they renounced their US citizenship the companies continued to enjoy American intellectual property protections and other benefits.
"What we need as a nation is a new sense of economic patriotism, where we all rise or fall together," he wrote. "We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes."
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