Obama wants to raise $200 billion by closing offshore tax loopholes

The Obama administration will unveil its plan to close offshore tax avoidance loopholes today, which target both U.S.-based multinational corporations and wealthy individuals, according to The Wall Street Journal. Up until now, the administration's main focus has been wealthy individuals who hide assets in foreign banks, the primary example being the ongoing IRS case filed against UBS.

The new plan, if passed by Congress, could raise up to $200 billion by closing four loopholes:

  • Curb the practice known as "deferral," where companies defer taxes indefinitely on many of their profits by leaving them in overseas banks and avoiding taxes until the money is repatriated back to the U.S. The administration expects to raise $60.1 billion through 2019.
  • Revise "check-the-box" rules that allow companies to decide where their subsidiaries should be taxed, which enables companies to take advantage of low-tax haven countries. The administration estimates this change could raise $86.5 billion through 2019.
  • Toughen rules on the use of tax credits granted to companies to offset taxes paid to foreign governments. The administration estimates increased tax collections of $43 billion through 2019 with this change.
  • Crack down on offshore individual bank accounts. The plan would increase information reporting and tax withholding as well as penalties to make it harder for foreign account-holders to win cases in court. The administration estimates increased tax collection of $9 billion through 2019.

The two industries that will be hardest hit by these changes are the pharmaceutical and technology industries. John Earnhardt, a spokesman for Cisco (CSCO), told the Journal, "If rules are changed on tax deferral and we are taxed in the U.S. on non-U.S. profit, this significant additional U.S. tax cost would adversely impact our ability to invest and grow our business in the U.S." He went on to say that this change will make it harder "to compete against foreign competitors who are not subject to this U.S. tax."

The administration believes that current tax loopholes encourage multinationals to move jobs overseas. Instead the administration wants to use this tax plan to increase incentives for job creation in the U.S. Some of the tax collections will be used to cover the cost of extending the soon-to-expire federal tax credit for research costs.

By adding the tax incentives to the program, the administration may find it easier to get this legislation through the Congress. But do expect major business opposition to water down the bill.

Lita Epstein has written more than 25 books, including Reading Financial Reports for Dummies.


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Capt Brian

NOT an easy article to read or get something out of. I am not a genius, and will have to go back and read it again. I got nothing out of it. [reading again]

Thick headed or something, but I still was prone to not reading every word, skipping looking for content, then not getting to the end. I have read medical journals that did the same thing. I suppose someone will figure out what the author is trying to convey, but I am gonna go read the funny paper.

Happy grins


Capt. Brian
The lost Navigator

January 29 2011 at 12:26 PM Report abuse rate up rate down Reply
fwheavyequip

wy bitch curency problems with china wen us dollar sinks like fallen plane
the dollar is on paar with the lira sad

January 29 2011 at 9:40 AM Report abuse rate up rate down Reply