US President Seeking Reform of Foreign Tax Loopholes

The signs were there in November last year. Today US President Barack Obama publicly stated his intention to, as the BBC report says, close tax provisions that allow firms to put off paying taxes on profits made overseas as long as those earnings are invested back into the overseas subsidiaries. Although, whether that intention survives the lobbying.. As RTÉ reports

It is understood that many of the US companies in Ireland are beefing up their operations in Washington so that they can lobby on the proposed changes. It is also understood that the Industrial Development Authority is increasing its operation in North America to identify investment opportunities for Ireland that might emerge from President Obama’s multi-billion dollar stimulus plan, along his legislative programme – which includes his tax reform policy.

And our local administration?From the Whitehouse fact sheet

1) Replacing Tax Advantages for Creating Jobs Overseas With Incentives to Create Them at Home
· Reforming Deferral Rules to Curb A Tax Advantage for Investing and Reinvesting Overseas
· Closing Foreign Tax Credit Loopholes
· Using Savings To Make Permanent The Tax Credit for Investing in Research and Experimentation at Home

2) Getting Tough on Overseas Tax Havens
· Eliminating Loopholes for “Disappearing” Offshore Subsidiaries
· Cracking Down on the Abuse of Tax Havens by Individuals
· Devoting New Resources for IRS Enforcement to Help Close the International Tax Gap

And from the US President’s remarks on International Tax Policy Refrom.

Let’s begin with a simple premise: Nobody likes paying taxes, particularly in times of economic stress. But most Americans meet their responsibilities because they understand that it’s an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being.

And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs. And many are aided and abetted by a broken tax system, written by well-connected lobbyists on behalf of well-heeled interests and individuals.

Indeed there are, Mr President..

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  • Heard them discussing this on Newstalk or Radio 1 this evening. The consensus being that he’ll never get this through Congress because of the minefield of vested-interests there. Also, remember you effectively need 60 votes in the Senate to force something through over a fillibuster, and the proxies include a lot of Democrats.

  • Pete Baker

    FT

    We’ll just have to wait and see what compromises, if any, Obama is willing to make on these proposals.

    And how those compromises affect companies in Ireland, and potentially in Northern Ireland.

    A defeat on this issue, though, would be damaging.

  • pól

    Despite the knock on effects that this would have on people here, I’m broadly in favour of this proposal. This economic collapse can give us an opportunity to restructure, and promote home-grown businesses. We all knew that sooner of later the American money was going to dry up.

  • 0b101010

    Trying to position taxes as a patriotic duty is as distasteful as the neocons’ attempt to paint every decision as “with us or agin’ us”. Somewhat ironic that it’s the government that uses terror — threat of force, detention and theft of property — to take taxes in the first place.

    From a statist viewpoint, their plan sounds fair: incentives to keep jobs domestic, close loopholes and block tax avoidance. Fair enough, right? The problem is they might just be cutting off their nose to spite their face. They’re betting that domestic companies who offshore their jobs and wealth won’t relocate entirely, and take the last of the tax revenue from domestic expenditure with them. They’re betting that the evaders that least want to pay taxes will give up, stop struggling and accept worse terms than they’re evading now. Seems unlikely to me.

    Now, for years, we’ve talked about stopping Americans from illegally hiding their money overseas, and getting tough with the financial institutions that let them get away with it.

    If financial institutions won’t cooperate with us, we will assume that they are sheltering money in tax havens, and act accordingly.

    Emphasis mine. Seems everyone was rightfully up in arms about the Bush administration declaring people guilty without trial, or even proof, but Obama can get away with declaring it publicly with nary a blink.

    The Obama administration feels like you must have those mobile weapons facilities… I mean offshore tax havens… isn’t that good enough proof to take your property by force?

    So all in all, these and other reforms will save American taxpayers $210 billion over the next 10 years

    How is it saving “American taxpayers” anything by promising to force more Americans to pay taxes?

    In other words, we’re beginning to restore fairness and balance to our tax code.

    By abolishing income taxes and replacing them with consumption taxes? Or by reducing income taxes to a flat rate regardless of entity, income bracket or marital status? No?

    So by “fairness and balance” the Obama administration really means that some citizens must pay more than others.

  • Even if it goes through it doesn’t look particularly threatening. It’s a water-down version of what he hinted at during the campaign, and it’ll likely be watered down even more if it’s to get through…

  • Itwas SammyMcNally whatdoneit

    Some Offaly boy he turned out to be.

  • Greenflag

    ‘ but Obama can get away with declaring it publicly with nary a blink.’

    For some odd reason American taxpayers are beginning to believe that those wealthy corporations and individuals who have ‘milked’ the American consumer and median income/middle class /lower income people for decades, and used lax overseas investment regulations to stash their funds ‘offshore ‘ thus pushing the tax onus on the suckers back home – will now get their ‘just desserts ‘

    Most Americans think it’s long overdue . Not only in tax evasion but across many areas of the economy , health care and education Obama is on a roll as the Americans say . I’m beginning to think he may yet ‘defeat’ the 2 trillion medical insurance complex which has been a ball and chain around the neck of american medium sized businesses for decades and even now is strangling the larger corporations .

    Obama is ‘evolving ‘ into a very effective president in rapid quick time – While I haven’t yet dubbed him Black Bertie 😉 he certainly has a noticeable teflon quality which is reminiscent of the Gipper .

    Confidence in the USA (don’t ask me why -ask one of those economist fortune tellers ) is on the way back .

    This one could still end in a bed of roses or on a board of nails . The conventional wisdom is that the former appears more likely now than the latter . The Dow is hitting 8,500 and the GOP are rumoured to be considering a name change to SARCEP ( Southern Appalachian Redneck Creationist Party) as they implode in a chaotic frenzy of tea parties along with Alaskan and Texan secessionista hoping for either instant rapture or a russian/chinese / jihad /anything invasion or attack on the USA .

    When Peggy Noonan (Ronald Reagan’s speech writer and GOP ‘intellectual’ sooth sayer) is praising Obama while criticising her own party’s apparent death wish it’s time to start believing that a major political change is underway in the USA -brought about mainly by the perceived abject failure of the GOP in the past two administrations . There are precious few moderate Republicans left in the GOP and in the New England states there are only 2 Congresswomen . Think Scotland and the Conservative party .

    Noonan has pointed out in the WSJ that the current Republican fervour for shrinking the party to it’s core conservative white roots is not the way to rebuild the party . She has a point .

    Those whom the political Gods wish to destroy etc etc . It may well take another rout of the GOP in 2012 before the penny finally drops that there are not enough millionaire votes in the USA to win a national election -well not like there used to be . Another one or two Arlen Spectors crossing the floor could be the signal for the GOP herd to go apeshit altogether and draft A Palin /Limbaugh ticket for 2012 🙁

    You have to feel sorry for the few remaining moderates in the GOP people like Senator Grassleigh of Iowa , Congresswomen Collins etc .

  • Metacom

    I’m very doubtful these proposals will ever become law other than in a very watered down version. Bauchus (head of Senate finance)has already indicated he’s not fully on board. Competiveness will ultimately trump any other concerns. When almost the entire rest of the world, including most recently the UK, has some sort of territorial system (no tax on offshore income) it would be insane to increase the tax burden on US multinationals. Cooler heads will ultimately prevail on this one.

  • 0b101010

    We heard today that Chrysler aren’t likely to repay billions in “loans” taken from the taxpayer by the US government under both Bush and Obama. On top of that, they’re expecting to shower them with billions more to restructure Chrysler under Fiat, an Italian company, who are being awarded a 20% stake in the company at no risk!

    Is it fair and balanced to take so much from the taxpayer to gamble on proven incompetents and failed business models?

    Is it fair and balanced that the US taxpayer has now paid anywhere from tens- to hundreds-of-thounds of dollars to sustain each and every unsustainable job at Chrysler?

    Is it fair and balanced to use the US taxpayer to finance a gift to a foreign company while, out of the other side of your mouth, scolding apparently successful domestic companies for employing overseas?

    (I’ve struggled to find exact numbers for the money thrown at Chrysler to date and promised in future. No two sources seem to agree. That’s scary in itself.)

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