“Washington is buzzing this summer about inversions, and the chatter has nothing to do with the weather,” Richard Rubin, Derek Wallbank, Drew Armstrong, and Zachary R. Mider report for Bloomberg. “This week, Treasury Secretary Jacob J. Lew and Senate Majority Leader Harry Reid became the latest to press for a crackdown against corporate inversions. These are when U.S. companies switch their addresses to low-tax nations like Ireland, often through a takeover of a smaller company, reducing their tax bills while typically keeping their headquarters and listings in the U.S.”
“Democratic lawmakers were coalescing yesterday around their resistance to these deals, as a possible election-year rallying point. Reid, of Nevada, called for comprehensive rules against such changes of address,” the quartet reports. “A handful of bills working through Congress already include language aimed at cracking down on the practice. White House Press Secretary Josh Earnest said President Barack Obama will discuss the issue more in coming weeks.”
“Senate Finance Chairman Ron Wyden, who will chair a hearing next week on international taxes and inversions, has also hardened his stance. The Oregon Democrat, who had until recently preferred putting retroactive limits on inversions as part of tax-code changes that could be a year or more off, said yesterday he was exploring how the ‘inversion loophole’ could be plugged sooner, a move that is meeting Republican objections,” the quartet reports. “Democrats are seizing on this potential campaign weapon ahead of their midterm-election bids to defend their control of the Senate in the face of foreign policy crises, a slow economic recovery and sagging popularity of Obama’s health-care law.”
“Republicans generally shrugged off the challenge as a misguided effort to treat a symptom of what they see as a broader disease. The party’s leaders want a new tax code, with lower corporate tax rates than the current 35 percent — the highest in the industrialized world — to keep companies from bolting to lower-cost venues in a bid to stay competitive,” the quartet reports. “‘The administration runs a risk — I mean, here we are well into the president’s second term and he continues to blame others for his own economic failures and underperformance,’ said Representative Peter Roskam, an Illinois Republican, in an interview.”
“The U.S., unlike most major economies, taxes the worldwide income of American-based companies. After those U.S.-based companies pay taxes to governments overseas for income earned elsewhere, they can defer residual U.S. taxes until they repatriate the money,” the quartet reports. “That system has created an incentive for companies to find ways to book profits in low-tax jurisdictions and leave them there. U.S. companies such as Apple Inc. have come under scrutiny from lawmakers for assigning profits to subsidiaries in low-tax or no-tax jurisdictions.”
Much more in the full article here.
“So far, Republicans as well as some influential Democrats in Congress have favored limiting inversions through a comprehensive overhaul. Some of those lawmakers believe a quick fix could worsen U.S. companies’ position,” John D. McKinnon reports for The Wall Street Journal. “‘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,’ Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said in a recent statement.”
“Finance Committee Chairman Ron Wyden (D., Ore.) also hasn’t pushed for a quick fix. In a Wall Street Journal op-ed in May, he said that ‘this loophole must be plugged,'” McKinnon reports. “But he indicated that he is still hopeful for a comprehensive tax rewrite that would limit inversions on a retroactive basis.”
Read more in the full article here.
MacDailyNews Take: Apple CEO Tim Cook, May 21, 2013:
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.
Related articles:
Rupert Murdoch criticizes excessive regulation, corporate tax policy for stymieing G20 growth – July 17, 2014
EU’s investigation of Apple’s taxes isn’t going to cause the company any problems – June 13, 2014
U.S. SEC ends review of Apple taxes, overseas cash – October 5, 2013
Obama, world leaders push big companies like Apple, Google to pay more taxes – September 6, 2013
