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12-09-2015, 05:33 PM
Democratic presidential candidate Hillary Clinton will unveil a new proposal Wednesday to make it more difficult for multinational corporations to game the U.S. tax system.
Democrats have criticized companies for executing what is called an "inversion," in which an American company buys a foreign company and then transfers its main business operations abroad to avoid U.S. taxes, costing taxpayers billions of dollars.
Last month, Clinton criticized the proposed $160 billion merger of Pfizer and the Dublin-based Allergan, which would allow Pfizer to take advantage of Ireland's lower corporate tax rate. She said the deal, which would be the largest tax inversion ever, was unfair for American taxpayers.
Clinton has since said she supports tightening rules for companies wanting to invert by requiring that they be at least 50 percent foreign-owned, going beyond the current 20 percent rule. A company looking to invert by merging with a foreign company would therefore have to merge with one that is the same size or bigger. She's also called for a new “exit tax” on companies entering into these deals.
On Wednesday, a Clinton aide told The Huffington Post that she would go further than these suggestions to target what is called "earnings stripping," which often accompanies a corporate inversion. When a U.S. company inverts, it will often load the U.S. subsidiary up with debt that is “owed” to the company's foreign headquarters. The company can then deduct interest payments on the debt from its taxable income, reducing its U.S. tax liability.
Clinton will say at a town hall in Waterloo, Iowa, that if Congress does not act to end the practice of earnings stripping, the Treasury Department could use its legal authority to crack down on the tax loophole.
This action is something the Treasury Department has studied, though it did not announce any new policies to limit earnings stripping when it unveiled modest new measures to limit inversions in late November. (Treasury Secretary Jack Lew did say that the department wanted to take additional actions in coming months, including steps to limit earnings stripping.)
The department had solicited public comments on ways to "make inversions less economically appealing" in 2014 (http://www.reuters.com/article/us-usa-inversion-treasury-idUSKCN0HR1YA20141002#DkUCthOmf0kJejCU.97). At the time, Reuters reported that "Congressional aides and lobbyists said the [Obama] administration was likely uncertain about its legal authority to tackle the practice and did not want to overreach." Clinton's Wednesday announcement indicates that she doesn't believe there would be a problem with taking executive action to end the practice.
Clinton's campaign said that the closure of the “earnings stripping” loophole would raise approximately $60 billion over 10 years, which could then fund initiatives to boost manufacturing, research and small businesses.
Sen. Chuck Schumer (D-N.Y.) introduced legislation targeting earnings stripping (http://www.law360.com/articles/567286/schumer-tackles-earnings-stripping-in-bid-to-blunt-inversions) in 2014.
Of course, any attempt to crack down on inversions and earnings stripping would upset Wall Street banks, which have made approximately $1 billion in fees (http://start.westnet.ca/newstempch.php?article=2014/10/22/chiquita-tax-inversion_n_6022874.html) on inversion deals in the past three years. Clinton is neck and neck (http://start.westnet.ca/newstempch.php?article=entry/clinton-bush-wall-street_562934f1e4b0aac0b8fc26e9) with Republican presidential candidate and former Florida Gov. Jeb Bush in the race for campaign donations from Wall Street employees and executives.
Also on HuffPost:
-- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. (http://start.westnet.ca/newstempch.php?article=terms.html/) It may be used for personal consumption, but may not be distributed on a website.
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Democrats have criticized companies for executing what is called an "inversion," in which an American company buys a foreign company and then transfers its main business operations abroad to avoid U.S. taxes, costing taxpayers billions of dollars.
Last month, Clinton criticized the proposed $160 billion merger of Pfizer and the Dublin-based Allergan, which would allow Pfizer to take advantage of Ireland's lower corporate tax rate. She said the deal, which would be the largest tax inversion ever, was unfair for American taxpayers.
Clinton has since said she supports tightening rules for companies wanting to invert by requiring that they be at least 50 percent foreign-owned, going beyond the current 20 percent rule. A company looking to invert by merging with a foreign company would therefore have to merge with one that is the same size or bigger. She's also called for a new “exit tax” on companies entering into these deals.
On Wednesday, a Clinton aide told The Huffington Post that she would go further than these suggestions to target what is called "earnings stripping," which often accompanies a corporate inversion. When a U.S. company inverts, it will often load the U.S. subsidiary up with debt that is “owed” to the company's foreign headquarters. The company can then deduct interest payments on the debt from its taxable income, reducing its U.S. tax liability.
Clinton will say at a town hall in Waterloo, Iowa, that if Congress does not act to end the practice of earnings stripping, the Treasury Department could use its legal authority to crack down on the tax loophole.
This action is something the Treasury Department has studied, though it did not announce any new policies to limit earnings stripping when it unveiled modest new measures to limit inversions in late November. (Treasury Secretary Jack Lew did say that the department wanted to take additional actions in coming months, including steps to limit earnings stripping.)
The department had solicited public comments on ways to "make inversions less economically appealing" in 2014 (http://www.reuters.com/article/us-usa-inversion-treasury-idUSKCN0HR1YA20141002#DkUCthOmf0kJejCU.97). At the time, Reuters reported that "Congressional aides and lobbyists said the [Obama] administration was likely uncertain about its legal authority to tackle the practice and did not want to overreach." Clinton's Wednesday announcement indicates that she doesn't believe there would be a problem with taking executive action to end the practice.
Clinton's campaign said that the closure of the “earnings stripping” loophole would raise approximately $60 billion over 10 years, which could then fund initiatives to boost manufacturing, research and small businesses.
Sen. Chuck Schumer (D-N.Y.) introduced legislation targeting earnings stripping (http://www.law360.com/articles/567286/schumer-tackles-earnings-stripping-in-bid-to-blunt-inversions) in 2014.
Of course, any attempt to crack down on inversions and earnings stripping would upset Wall Street banks, which have made approximately $1 billion in fees (http://start.westnet.ca/newstempch.php?article=2014/10/22/chiquita-tax-inversion_n_6022874.html) on inversion deals in the past three years. Clinton is neck and neck (http://start.westnet.ca/newstempch.php?article=entry/clinton-bush-wall-street_562934f1e4b0aac0b8fc26e9) with Republican presidential candidate and former Florida Gov. Jeb Bush in the race for campaign donations from Wall Street employees and executives.
Also on HuffPost:
-- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. (http://start.westnet.ca/newstempch.php?article=terms.html/) It may be used for personal consumption, but may not be distributed on a website.
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