Monday, July 28, 2014

Treasury: Congress must halt foreign tax inversions

You recall I've written about tax inversions recently; they're a crock and they're un-American. Here's Treasury Secretary Jacob Lew's take on what Congress should do to stop this flood of inversions [emphasis mine]:

To make sure the merged company is not merely masquerading as a non-U.S. company, shareholders of the foreign company would have to own at least 50 percent of the newly merged company — the current legal standard requires only 20 percent. This approach is based on a bipartisan law enacted in 2004 and could serve as a basis for a bipartisan solution again. Right now, leaders in Congress have put forward strong legislation that adopts elements of this plan.

For legislation to be effective, it must be retroactive. Current proposals in Congress would apply to any inversion deal after early May of this year. The alternative — legislation taking effect after the president signs it into law — could have the perverse effect of encouraging corporations to act more quickly, negotiate new deals and rush to close those transactions before the bill is enacted. 

And here's Lew's conclusion:

Our tax system should not reward U.S. companies for giving up their U.S. citizenship, and unless we tackle this problem, these transactions will continue. Closing the inversion loophole is no substitute for comprehensive business tax reform, but it is a necessary step down the path toward a fair and more efficient tax system, and a step that needs to be in a place for tax reform to work.

Now it's time for Congress to act.

By Jacob J. Lew
July 27, 2014 | Washington Post

No comments: