The White House said that in 2004, multinational corporations
enjoyed an effective tax rate of 2.3 percent in the United
States because of such allowances. Aides said that was the
most recent year available for analysis.
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The Christian Science Monitor May 4, 12:55 PM EDT
Obama announces plan to close tax loopholes
By PHILIP ELLIOTT Associated Press Writer
WASHINGTON (AP) -- President Barack Obama vowed Monday to
"detect and pursue" American tax evaders and go after their
offshore tax shelters.
In announcing a series of steps aimed at overhauling the U.S.
tax code, Obama complained that existing law makes it possible
to "pay lower taxes if you create a job in Bangalore, India,
than if you create one in Buffalo, New York. "
The president said he wants to prevent U.S. companies from
deferring tax payments by keeping profits in foreign countries
rather than recording them at home and called for more
transparency in bank accounts that Americans hold in notorious
tax havens like the Cayman Islands.
"If financial institutions won't cooperate with us, we will
assume that they are sheltering money in tax havens and act
accordingly," Obama said.
The president, who hammered on this issue during his long
campaign for the White House, said at a White House event that
his plan would generate $210 billion in new taxes over 10
years and "make it easier" for companies to create jobs at
home. Over a decade, $210 billion would make a modest dent in
a federal deficit expected to swell to $1.2 trillion in 2010.
Under the plan, companies would not be able to write off
domestic expenses for generating profits abroad. The goal is
to reduce the incentive for U.S. companies to base all or part
of their operations in other countries.
He said the government also is hiring nearly 800 new IRS
agents to enforce the U.S. tax code.
Congress is expected to resist significant portions of Obama's
plan.
The administration is not seeking to repeal all overseas tax
benefits. Obama called his proposal "a downpayment on the
larger tax reform we need to make our tax system simpler and
fairer and more efficient for individuals and corporations."
"Nobody likes paying taxes, particularly in times of economic
stress," Obama said. "But most Americans meet their
responsibilities because they understand that it's an
obligation of citizenship, necessary to pay the costs of our
common defense and our mutual well-being."
The current tax code, he said, makes it too easy for "a small
number of individuals and companies to abuse overseas tax
havens to avoid paying any taxes at all."
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 businesses. Officials estimate that making the
tax credits permanent would cost taxpayers $74.5 billion over
the next decade.
But administration aides said 75 percent of those tax credits
cover the cost of workers' wages.
Under existing laws, companies with operations overseas pay
U.S. taxes only if they bring the profits back to the United
States. If they keep the profits offshore, they can defer
paying taxes indefinitely. Obama's plan, which would take
effect in 2011, would change that.
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.
Treasury Secretary Timothy Geithner joined Obama for the
announcement. He said the proposals would end "indefensible
tax breaks and loopholes which allow some companies and some
well-off citizens to evade the rules that the rest of America
lives by."
Geithner called them "common-sense changes designed to restore
balance to our tax code."
The White House said that in 2004, multinational corporations
enjoyed an effective tax rate of 2.3 percent in the United
States because of such allowances. Aides said that was the
most recent year available for analysis.
They said the situation was indefensible.
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