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Attack On US Administration's Anti-Inversion Proposals

by Mike Godfrey,, Washington

12 September 2014

US Treasury Secretary Jack Lew's recent call for immediate legislative action from Congress to halt the flow of multinationals moving their tax base abroad through corporate inversions has been attacked by Americans for Tax Reform.

In a post on its site, titled "The Obama Administration Still Not Getting It on Corporate Inversions," ATR points out that the use of tax inversions by US corporations is "inevitable if you have a flawed tax system."

The US international tax system, it states, "is the worst in the world" for multinational companies, as under the US "worldwide" code their profits earned overseas are exposed to US taxation when repatriated. "Combine this double taxation with the highest corporate income tax rate in the developed world (over 39 percent, compared with a developed nation average under 25 percent), and you have a recipe for corporate inversions to happen."

ATR has a "simple solution: lower the tax rate (down to the developed nation average of 25 percent, or even less) and stop double taxing (by adopting a territorial tax regime)."

ATR said Lew and the Administration are calling for "a phony corporate tax reform with a top rate of 28 percent and higher taxes than before." Such a top rate would not be low "enough to make America competitive," and would be combined with initial tax increases (by closing tax expenditures and deductions) "even bigger than the rate reduction, [so that] companies are worse off than before. They want to use the net tax increase money for another round of stimulus spending on roads," ATR said.

However, ATR concluded that: "Arguably, the most offensive part of the plan is that it would apply to companies who have already made the inversion decision, months or even years before the law is passed. Apparently the companies, who were making sound business decisions at the time, neglected to hire psychics to [anticipate] what Congress might do."

TAGS: compliance | tax | business | tax compliance | law | corporation tax | multinationals | legislation | transfer pricing | United States | tax breaks | tax reform | Tax

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