CFP Says US Treasury's Message On Corporate Inversions Mixed

by Mike Godfrey, Tax-News.com, London

24 May 2002

The heads of three leading US think-tanks this week issued a joint response to Treasury Secretary, Paul O'Neill's suggestions that the country's tax code needs to be amended in order to stem the flow of offshore reincorporations, or corporate inversions as they are sometimes known.

In a written statement released last week, the Treasury Secretary placed the blame for a spate of corporate relocations to Bermuda squarely on America's tax code rather than on the fleeing companies, and warned that the hasty introduction of legislation designed to punish expatriating companies while failing to remove the incentive to relocate elsewhere could harm the US economy in the long term.

Responding to this on Wednesday, Andrew Quinlan of the Center for Freedom and Prosperity praised the government for recognising the need for tax reform, but observed that the Administration needs to go further in order to ensure that US companies are able to compete properly in the international arena:

'Treasury needs to turn these good words into concrete action,' he said, continuing that: 'Unfortunately, the report does not endorse territorial taxation. Even more worrisome, it calls for higher taxes on foreign based companies that create jobs in America.'

Daniel Mitchell, Senior Fellow at the Heritage Foundation also praised the Treasury report, announcing that 'The President's team deserves credit for identifying serious flaws in the internal revenue code.' However, with regard to the imposition of punitive measures against foreign-based companies, he observed: 'The Bush Administration should have learned from the steel tariff fiasco that protectionist policies are never the answer.'

Veronique de Rugy, Policy Analyst at the Cato Institute echoed the sentiments of the CFP and Heritage Foundation chiefs, challenging the US government to 'make America more attractive to the world's investors.'

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