[Today's Paper] from [Los Angeles Times]
Obama calls for crackdown on overseas tax havens
Associated Press
8:54 AM PDT, May 4, 2009
WASHINGTON -- President Barack Obama is proposing to close tax loopholes for companies and individuals with operations or bank accounts overseas.
Obama said today he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign companies rather than recording them at home. He also called for more transparency in bank accounts held by Americans in tax havens such as the Cayman Islands.
Obama said that his plan would generate $210 billion in new taxes over 10 years and "make it easier" for companies to create jobs at home. Congress may resist portions of the plan.
He said this would be "savings we can use to reduce the deficit. ... We're putting a middle class tax cut in the pockets of 95 percent of working families."
White House officials acknowledged the political challenges facing the plan. The administration won't seek a complete repeal of overseas tax benefits and, although the rule changes are narrower than some anticipated, business leaders still oppose them as a tax hike. Obama aides countered that the plan is a step toward the massive overhaul of international financial regulations that the president has promised.
In exchange, Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with business. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade.
But administration aides said that 75 percent of those tax credits pay workers' wages; given the struggling economy, aides were reluctant to do anything that could add more Americans to the unemployment rolls.
It was small comfort. Companies which shelter profits in international accounts stand to lose billions if Obama's plan becomes law. Under the existing regulation, those companies pay taxes only if they bring the profits back to the U.S. If they keep the profits offshore, they can defer paying taxes indefinitely -- and many do.
Obama's plan wouldn't go into effect until 2011; Obama has said he does not want to tinker with tax revenues until his $787 billion stimulus plan has run its course. The proposals, however, were far from complete, and aides said this was just one piece of the administration's plan for a sweeping overhaul.
First up: Companies won't be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.
Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against U.S. companies who keep their entire business operation domestic.
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Under Obama's proposal, Americans would have to prove they were not breaking U.S. tax laws when they send money to banks that don't cooperate with tax officials. It essentially would reverse a long-held assumption of innocence in U.S. courts.
If financial institutions cooperate with Washington and disclose details when asked, Americans could invest anywhere they like.
Obama officials also said they would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies "check the box" and treat international subsidiaries as mere branch offices. Officials said it was meant as a paperwork shortcut that is now a widely used and perfectly legal way to avoid paying billions in taxes on international operations.
Obama calls for crackdown on overseas tax havens
Associated Press
8:54 AM PDT, May 4, 2009
WASHINGTON -- President Barack Obama is proposing to close tax loopholes for companies and individuals with operations or bank accounts overseas.
Obama said today he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign companies rather than recording them at home. He also called for more transparency in bank accounts held by Americans in tax havens such as the Cayman Islands.
Obama said that his plan would generate $210 billion in new taxes over 10 years and "make it easier" for companies to create jobs at home. Congress may resist portions of the plan.
He said this would be "savings we can use to reduce the deficit. ... We're putting a middle class tax cut in the pockets of 95 percent of working families."
White House officials acknowledged the political challenges facing the plan. The administration won't seek a complete repeal of overseas tax benefits and, although the rule changes are narrower than some anticipated, business leaders still oppose them as a tax hike. Obama aides countered that the plan is a step toward the massive overhaul of international financial regulations that the president has promised.
In exchange, Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with business. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade.
But administration aides said that 75 percent of those tax credits pay workers' wages; given the struggling economy, aides were reluctant to do anything that could add more Americans to the unemployment rolls.
It was small comfort. Companies which shelter profits in international accounts stand to lose billions if Obama's plan becomes law. Under the existing regulation, those companies pay taxes only if they bring the profits back to the U.S. If they keep the profits offshore, they can defer paying taxes indefinitely -- and many do.
Obama's plan wouldn't go into effect until 2011; Obama has said he does not want to tinker with tax revenues until his $787 billion stimulus plan has run its course. The proposals, however, were far from complete, and aides said this was just one piece of the administration's plan for a sweeping overhaul.
First up: Companies won't be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.
Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against U.S. companies who keep their entire business operation domestic.
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Under Obama's proposal, Americans would have to prove they were not breaking U.S. tax laws when they send money to banks that don't cooperate with tax officials. It essentially would reverse a long-held assumption of innocence in U.S. courts.
If financial institutions cooperate with Washington and disclose details when asked, Americans could invest anywhere they like.
Obama officials also said they would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies "check the box" and treat international subsidiaries as mere branch offices. Officials said it was meant as a paperwork shortcut that is now a widely used and perfectly legal way to avoid paying billions in taxes on international operations.
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