President Obama on Tuesday called for the Republican-controlled Congress to close corporate tax loopholes such as those that allow U.S. companies to reincorporate overseas to lower their taxes.
{mosads}A good way to close the loopholes would be through business tax reform, but so far Republicans haven’t taken action, the president said during a White House press briefing.
“My hope is they start getting serious about it,” Obama said.
The president’s comments come the day after the Treasury Department announced new actions designed to limit corporate inversions. Inversions are transactions in which a U.S. company merges with a foreign company and reincorporates the combined company overseas to lower its tax burden. This practice has frequently been criticized by lawmakers and presidential candidates.
Obama said that when companies exploit loopholes such as inversions, investment is hindered in the United States.
“It sticks the rest of us with the tab,” he said.
Americans should be able to know that “big corporations aren’t playing by a different set of rules,” Obama said.
The Treasury Department released temporary regulations this week that would reduce tax benefits for serial inverters. It also proposed rules designed to limit “earnings stripping,” one of the major tax benefits for companies that invert.
This is the third round of guidance Treasury has issued on inversions, following announcements in September 2014 and November 2015.
Many Democratic lawmakers are pleased that the Treasury took further action and called for Congress to take up the issue.
The liberal-leaning Americans for Tax Fairness said Tuesday the new guidance would deny tax breaks to U.S. pharmaceutical giant Pfizer, which it had expected to get through its planned acquisition of Ireland-based Allergan. The $160 billion deal would be the largest inversion to date.
But top Republican congressional tax writers criticized the Treasury’s approach, saying inversions need to be addressed through tax reform rather than regulations, and that the guidance could make it more difficult for foreign companies to invest in the United States.