US moves to dissuade firms from moving abroad to lower taxes
WASHINGTON — The U.S. Treasury Department has issued rules to limit the allure of “tax inversions” — whereby companies trim their tax bills by moving abroad.
The rules would limit companies’ ability to make internal loans that saddle their U.S. subsidiaries with debt and shift profits to countries with lower tax rates — a process called “earnings stripping.” Treasury softened the rules it proposed in April to avoid disrupting normal business operations.
“We have taken a series of actions to make it harder for large foreign multinational companies to avoid paying U.S. taxes and reduce the incentives for U.S. companies to shift income and operations overseas,” Treasury Secretary Jacob Lew said. Lew described the move as a partial measure and urged Congress to take action “to enact comprehensive business tax reform with specific anti-inversion and earnings stripping provisions.”
Republicans quickly criticized the rules. Sen. Orrin Hatch, R-Utah, warned they “could jeopardize American businesses and the U.S. economy.”
But Democrats countered.
“If Republicans are serious about reforming our tax code and making it fairer for all Americans,” said Michigan Rep. Sander Levin, top Democrat on the tax-writing House Ways and Means Committee, “they should begin by joining with Democrats to pass legislation to close corporate tax loopholes.”