Obama Tax Rhetoric on Offshore Profit Falls Shy of Action

J8bCTFz

Corporate tax avoidance is a huge issue being dealt with globally by the US and other major economies. The issue has become particularly prominent in the UK & France, which the US government thinks will interfere with it collecting taxes from US companies. Because these companies will be under European regulatory bodies, they will pay their taxes here, which rubs Obama’s administration the wrong way.

Catherine Schultz, the Vice President for tax policy at the National Foreign Trade Council stated, “We feel like Treasury has been doing a good job in representing U.S. interests… We also feel like they’ve been doing a good job in making sure that the international tax norms are not turned upside down.” The NFTC’s board of directors contains Google Inc. and Pfizer Inc.

Overseas Income

The new proposals made by Obama would impact US companies operating overseas. It would cap business’ ability to avoid paying US tax on some foreign revenue and implement a minimum tax on overseas profit as well as raise tax on money generated through patents etc.

Stack, the Treasury Department’s deputy assistant secretary for international tax affairs said, “No one would really have designed the system where you can have the degree of stateless income or low-tax income that we have today,” Stack, the Treasury Department’s deputy assistant secretary for international tax affairs.  Stack went on to say that the US has no intention of implementing a tax rule that is hard to understand and could create high-priced tax disputes for US businesses.

‘Different Directions’

Martin Sullivan, chief economist at Tax Analysts said, “There’s fundamental conflict between protecting your multinationals and preventing profit shifting, because it’s your multinationals that are doing most of the profit shifting.” Tax Analysts are a non-profit in Falls Church, Virginia. “The U.S. Treasury folks are getting pulled in two different directions. That’s a whole other dynamic from the White House talking about companies pushing profits offshore.”

Cracking down on the taxing of global companies has become a focus of taxation bodies in other countries. Not many people expect much action from Obama’s administration in terms of clamping down on huge corporations such as Google, Apple and Yahoo! Dodging taxes by moving their profits to tax havens.

Market Value

“Supportive and thoroughly engaged” was how Stack described the US last week in regards to the OECD’s work.

Manal Corwin, national leader of the international tax practice at KPMG LLP stated, “They are very focused on making sure that this isn’t a disproportionate attack on U.S. multinationals… The U.S. government does represent those interests and tries to make sure that U.S. multinationals don’t get inappropriately dragged in or dragged through for political gains by others.”

‘Through Regulation’

Corwin went on to say, “It’s a balancing of what they should do now to fix aspects of our system through regulation vs. what is more appropriately incorporated into broader tax reform.”

Italy passed a ruling forcing their companies to buy online advertisements from local companies in December. Mexico has recently taken a similar standpoint, creating legislation, which limits the deductions subsidiaries have to pay in the specific region to companies outside Mexico.

Schultz stated, “Countries are already unilaterally making changes… U.S. companies are getting very actively involved — because they’re being forced to.”