Obama wants limits on US company mergers abroad

Democrats seek to draw sharp contrasts with Republicans by portraying them as defenders of corporate loopholes
Associated Press
Jul 25, 2014

Striking a populist stand ahead of the midterm elections, President Barack Obama is demanding "economic patriotism" from American corporations that seek overseas mergers to avoid U.S. taxes.

Obama and congressional Democrats are pushing to severely limit such deals, a move resisted by Republicans who argue the entire corporate tax code needs an overhaul.

Obama was scheduled to address the issue in remarks Thursday afternoon at a technical college in Los Angeles. Though he included a proposal to rein in such mergers and acquisitions in his 2015 budget, Obama's speech marks a new, more aggressive focus on the subject.

"The president has made clear that these companies are essentially renouncing their American citizenship by shipping their profits overseas to avoid paying taxes even as they benefit from all the advantages of being here in America," White House spokesman Eric Schultz said ahead of Obama's remarks. "That's precisely what we mean by economic patriotism."

The push comes amid a developing trend by companies to reorganize with foreign entities through deals called "inversions" partly to reduce their tax payments in the U.S.

But it also comes ahead of the fall political campaign as Democrats seek to draw sharp contrasts with Republicans by portraying them as defenders of corporate loopholes, and as Sen. Elizabeth Warren, D-Mass., and others have been drawing praise from liberal arms of the Democratic Party for their overtly populist positions.

The growth of inversions has also concerned Republicans, but by and large they have called for a broader tax overhaul that would reduce corporate rates.

A total of 47 U.S.-based companies have merged with or acquired foreign businesses over the past decade in inversions, according to the Congressional Research Service. The issue gained attention earlier this year when Pfizer made an unsuccessful attempt to take over British drugmaker AstraZeneca. The deal would have allowed Pfizer to incorporate in Britain and thus limit its exposure to higher U.S. corporate tax rates

Most recently, Walgreen Co., the drug store chain that promotes itself as "America's premier pharmacy," is considering a similar move with Swiss health and beauty retailer Alliance Boots.

The Obama administration began to ramp up attention to these transactions last week with a letter from Treasury Secretary Jacob Lew to House and Senate leaders. Lew said such deals "hollow out the U.S. corporate income tax base."

Obama is calling on Congress to enact legislation that is retroactive to May, arguing that will stop companies from rushing into deals to avoid the law.

Senate Democrats picked up the call this week, with Sen. Dick Durbin of Illinois, the second-ranking Democratic leader, sending a letter to Walgreen President and CEO Gregory Wasson urging him and his board to reconsider the overseas deal.

"I believe you will find that your customers are deeply patriotic and will not support Walgreen's decision to turn its back on the United States," Durbin wrote.

On Wednesday, Senate Majority Leader Harry Reid weighed in with a floor speech that called inversions a "corporate citizenship scam."

Walgreen's spokesman Michael Polzin said the company is evaluating where to take its partnership with Alliance Boots. "We will do what is in the best long-term interests of our customers, employees and shareholders," he said.

Under such inversion deals, U.S.-based, multinational companies can lower their tax bills in part by combining with a foreign company and reorganizing in a country with a lower tax rate. The United States has a 35 percent income tax rate, the highest in the industrialized world, and unlike many other countries it also taxes income earned overseas and then brought home.

Under current law, shareholders of a U.S. company that merged with an offshore entity would have to own less than 80 percent of the combined entity to take advantage of a lower foreign tax rate. Obama's budget proposes slashing that cutoff to 50 percent and making the restriction retroactive to last May.

Republicans such as Sen. Orrin Hatch of Utah say the U.S. first must change its policy of taxing income earned abroad. But in a hearing this week, Hatch also said he was open to addressing the issue directly provided it was not retroactive and did not generate additional revenue.

"Ultimately, the best way to solve this problem will be to reform our corporate and international tax system in a manner that will make our multinationals competitive against their foreign counterparts," he said.

Administration officials estimate the deals, if allowed to continue, will cost the U.S. Treasury $17 billion in lost revenue over the next decade.

 

Comments

Contango

Re: "these companies are essentially renouncing their American citizenship,"

Don't the Dems b*tch that corps. aren't people? How can a corp. have "citizenship?"

Can't have it both ways.

Dr. Information

My thoughts exactly. Dems say cooperations aren't people/citizens when it comes to the healthcare mandate (that was overturned), but are when its comes to collecting taxes. Thats called talking out both of your holes at the same time.

Can't have it both ways.

Contango

Pres. Obama: “I don’t care if it’s legal – it’s wrong,”

Typical of the 'lawless' and corrupt nature of the Putz-in-Chief.

http://www.irishtimes.com/news/w...

Go ahead, close the "loophole" and foreign cos. will be buying U.S. cos. and putting the U.S. at an even greater economic and tax revenue disadvantage.

deertracker

It's Friday pooh! You know what that means! It's MARGARITA FRIDAY! It's on!

Contango

Re: "MARGARITA FRIDAY!"

Writes the off-topic drunk.

deertracker

No pooh, it's the only topic today. Don't you and the usual suspects ever enjoy yourselves? I do!

Contango

Re: "No,"

Yes. "Enjoy" your drunken stupor.

deertracker

I plan to. Every second of it!

jazzbo

It's amazing , deertracker , that the guy who is ALWAYS under the influence of alcohol , calls YOU a drunk.

The Big Dog's back

Yep, Mr drowning in Kesslers pooh.

deertracker

Absolutely comical jazz!

Contango

deertracker:

“I like Tequila!”

"I like Crown Royal too!"

Again: "Enjoy" your stupor, off-topic drunk.

sugar

F'ing amazing isn't it ? And his followers accept this garbage!

jazzbo

And you follow Ted Cruz.

Or some other rightwing nut.

Dr. Information

we get it, you hate Mexican's. Another hypocrite liberal racist.

Contango

"Jack Lew's Flee America Plan; The Obama Treasury wants to drive more U.S. companies overseas."

http://online.wsj.com/articles/j...

(Copy & paste the title in Google, click on link to get past the filters.)

------------------

Tresy. Sec. Jack Lew: Funny, he stuffed money in the Cayman Is. when he was with Citigroup.

Now he's all sanctimonious. Revolving door: Wall St & DC.

"Obama’s hypocrisy on Jack Lew and his Cayman investment":

http://www.washingtonpost.com/op...

The Big Dog's back

So you 2 go both ways? Interesting.

freespeech1

Typical "don't have anything of substance to add so you make ignorant comments". We have the highest corp tax rate in the world, and all you can make is sexual comments?

There you go again

Freespeech1-
Why do you waste your typing on trash comments from Dog Sh$t?!?!

freespeech1

I guess it helps me deal with the fact that there are people as dumb as him all over this country.

Dr. Information

dumb people do not deserve a long response.

CommonsenseNow

Ignore "big dog". All he does is call people names in all his posts; I haven't seen him post one intelligent comment. He doesn't get enough attention in the real world (for obvious reasons), so he hides behind a computer looking to rile people up. Perhaps spending his time getting his GED would be a wiser investment of time.

jazzbo

Awwww shut hell up NonsenseNow , There you go again , freespeech1 , - you NEVER have anything intelligent to say.

All you do is bash - and youre not even good at that.

deertracker

Always the same old song when Obama is mentioned

http://www.youtube.com/watch?v=3...

jazzbo

I LIKE IT

knowitall

You read that ultra extremist propaganda and believe it without checking yourself. You are why this country is going downhill. The EFFECTiVE tax rate is low.....about 12-13% with all the loopholes. It isn't the rate, it's the loopholes you uninformed antagonist.

Contango

Re: "go both ways"

Nah. Ask your "metrosexual" prez about the Down Low Club.

With boy pal Reggie "Body Man" Love:

https://www.google.ca/search?q=B...

deertracker

Right BD, they enjoy catching and pitching!!!!!!!!

Contango

Re: "Right,"

Is 13 your age or your IQ ?

deertracker

Are you coming on to me? EEEwwwlll!!!!!!!!!!

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