New "Inversion" Rules Short-Sighted
(Washington, D.C.) – The Obama Administration has announced a new set of rules to discourage corporate "inversions," in which U.S. companies merge with foreign firms and shift their headquarters abroad. Because the U.S. corporate tax rate is the highest among the world's advanced economies, and because it imposes taxes on profits earned in other countries, a growing number of firms have contemplated this move. With headquarters outside the United States, they continue to pay taxes on their U.S. sales, but not on profits earned elsewhere in the world. Some have portrayed this as a move to keep pace with foreign competitors who pay lower tax rates.
Jorge Lima, Policy Director of The LIBRE Initiative, released the following statement:
"Once again, the White House has chosen not to work with Congress to address the problems with our tax code – but instead to impose a regulation-heavy, short-term, unilateral fix. The Treasury Department says more changes may be coming, and it's not clear that even this change is legally permitted. This is not the way to enhance competitiveness, encourage economic growth, and ensure tax compliance.
The White House and Congressional leaders have said for years that the U.S. tax code needs to be overhauled. Families pay too much – especially after payroll tax hikes and new health care taxes. Companies face the highest corporate rates in the advanced world – which harms job creation. And loopholes and corporate welfare remain commonplace. These problems will eventually have to be addressed – by Congress and the president working together. Today's rule change is simply another attempt to regulate market behavior through government rules and doesn't get America any closer to a solution it needs."