WASHINGTON – President Barack Obama on Tuesday called on the Republican-controlled Congress to end tax inversions, praising new steps taken by the Treasury Department to curb the corporate practice.
The best way to end this behavior is with tax reform that lowers the corporate tax rate and closes loopholes, Obama said at a White House press briefing.
“When companies exploit loopholes like this, it makes it harder to invest in the things that are going to keep America’s economy going strong for future generations,” Obama said. “It sticks the rest of us with the tab.”
In a tax inversion, a large corporation acquires a smaller company in anther country and moves its headquarters there. That makes the company subject to more beneficial tax laws. This relocation is viewed as an act of tax avoidance.
The U.S. corporate tax rate is 35 percent, while other countries’ rates can be 12 percent.
The corporations keep most of their business here to benefit from American infrastructure, technology, research and workers, but by declaring they’re based somewhere else, they get all the rewards without fulfilling the responsibilities of paying their taxes, Obama said.
“It’s not that they’re breaking the laws, it’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by,” Obama said, referring to the Panama Papers.
The Panama Papers was a leak of more than 11.5 million financial and legal records that exposed corruption by people using secretive offshore holding companies. The investigation by an international consortium of journalists revealed information connected to people in more than 200 countries and territories.
According to a 2015 compilation by Bloomberg, 79 companies had completed a tax inversion or similar tax avoidance restructuring, including medical company Medtronic, Burger King and Fruit of the Loom. The most popular countries for new headquarters are Ireland, Cayman Islands, Bermuda and Canada.
“Unless the United States and other countries lead by example in closing some of these loopholes and provisions, then in many cases you can trace what’s taking place, but you can’t stop it,” Obama said. “There is always going to be some illicit movement of funds around the world. But we shouldn’t make it easy.”
These net outflows aren’t billions of dollars or even hundreds of billions of dollars – estimates are it may be trillions of dollars worldwide, Obama said, noting the money could be spent on needs in the U.S.
“It could make a big difference in terms of what we can do here,” Obama said.
Reach Erick Payne at [email protected] or 202-408-1489. SHFWire stories are free to any news organization that gives the reporter a byline and credits the SHFWire. Like the Scripps Howard Foundation Wire on Facebookand follow us onTwitter and Instagram.
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