New rules don’t fix tax problem
Corporate tax “inversion” deals became a prime target this year of President Barack Obama, as part of his running theme that many U.S. corporations are stealing from Americans by not paying their fair share.
After the August announcement of Burger King’s plans to merge with Canada-based Tim Hortons, the administration leapt into action — but in a way that only seems to have produced losers, with no real winners.
In late September, the Treasury Department announced regulations that it said were aimed at preventing inversions, deals in which a U.S. company is able to lower its tax bill by merging with a foreign company and shifting its headquarters there. Such deals are a clear indication of what business executives and politicians on both sides of the aisle have known for years: The United States tax system is uncompetitive and desperately needs an overhaul.
The United States has the highest corporate tax rate in the developed world, and is virtually the only country that requires ompanies to pay taxes not only on money earned domestically, but overseas if that money is brought to the United States.
The government should want companies to bring money into the country to reinvest. But these regulations make it harder for companies to bring money earned overseas back into the United States, by eliminating “certain techniques inverted companies currently used to gain tax-free access to the deferred earnings of a foreign subsidiary,” as the Treasury said in announcing the changes.
The United States’ uncompetitive tax rates are the real problem — and the one the administration, once again, is failing to address