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Obama Wants To Close Border – To Companies Leaving US

From Reuters:

Obama could curb corporate ‘inversions’ on his own: ex-U.S. official

By Kevin Drawbaugh | July 27, 2014

WASHINGTON (Reuters) – President Barack Obama could act without congressional approval to limit a key incentive for U.S. corporations to move their tax domiciles abroad in so-called "inversion" deals, a former senior U.S. Treasury Department official said on Monday.

By invoking a 1969 tax law, Obama could bypass congressional gridlock and restrict foreign tax-domiciled U.S companies from using inter-company loans and interest deductions to cut their U.S. tax bills, said Stephen Shay, former deputy assistant Treasury secretary for international tax affairs in the Obama administration.

In other words, US corporations are cutting their US taxes by buying companies overseas and making them the official tax residence for the company. And thereby avoiding the high US corporate tax rate, which is the highest in the world.

In an article being published on Monday in Tax Notes, a journal for tax lawyers and accountants, Shay said the federal government needs to move quickly to respond to a recent surge in inversion deals that threatens the U.S. corporate tax base.

And we can’t have that. That is the government’s money. Of course, another solution might be to lower the corporate tax rate.

Medical technology group Medtronic Inc, based in Minnesota, and drug maker AbbVie Inc, of Illinois, are in the midst of inverting to Ireland by buying smaller Irish rivals and shifting their tax domiciles to that country…

That wouldn’t have anything to do with the medical device tax that is included in Obama-Care, would it?

The biggest attraction of inversions for U.S. multinationals is putting their foreign profits out of the reach of the U.S. Internal Revenue Service…

And we can’t have that!

This legal strategy involves making loans from a foreign parent to a U.S. unit, which can then deduct the interest payments from its U.S. taxable income. Plus, the foreign parent can book interest income at its home country’s lower tax rate.

Section 385 empowers the Treasury secretary to set standards for when a financial instrument should be treated as debt, eligible for interest deductibility, and when it should be treated as ineligible equity. If a corporation has loaded debt into a U.S. unit beyond a certain level, Section 385 could be used by the government to declare the excess as equity and ineligible for deductions.

"The stuff I’m describing should be putting a crimp in tax-motivated deals," Shay said.

Mr. Shay is telling Obama to secure the border with his phone and pen. To keep corporations from sneaking out of the US. And taking the government’s tax money with them.

This article was posted by Steve Gilbert on Monday, July 28th, 2014. Comments are currently closed.

2 Responses to “Obama Wants To Close Border – To Companies Leaving US”

  1. Reality Bytes

    The Audacity of this Dope! In other words, Obama’s building an Iron Curtain to keep companies from escaping his oppressive taxation.

    When it comes to progressives, it’s Taxation Without RESERVATION.

  2. canary

    Obama needs Mexico for his own safe haven.

    “People should not dawdle,” said Shay, now a professor at Harvard Law School, in an interview on Friday about his article…” and would be a “slam dunk”

    Now that’s a fundraising idea to pay of the debt.

    O Bozo in a clown dunk tank and charge high fee per ball thrown.




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