WASHINGTON – Frank Clemente, executive director of Americans for Tax Fairness, issued the following statement today about the Administration’s action against corporate tax inversions outlined in this press release and fact sheet.
“The Obama Administration has taken a very important first step in removing a major incentive for corporations to change their corporate address, typically to a tax haven, to avoid paying their fair share of taxes. It will give CEOs considering an inversion pause to think – and it will give Congress time to act.
“The new rules put up a series of roadblocks that will make it very difficult for a company to be able to use an inversion to avoid paying taxes on its profits booked offshore that have avoided U.S. taxation because of deferral. Companies currently pursuing inversions that have billions of untaxed profits offshore – Pfizer ($69 billion), Medtronic ($20.5 billion) and AbbVie ($21 billion) – have now lost a major tax dodge. They should pay the taxes they owe, rather than play games to shirk their responsibility.
“The Administration also is starting a process to restrict the use of “earnings stripping,” a crucial tax-dodging scheme used by companies that invert. We strongly oppose the use of this accounting trick to effectively shift profits earned in the United States to tax havens. This is done when an inverted company, now a foreign one, loads its U.S. subsidiary with debt that is partly tax deductible. This is not a business decision, but a tax avoidance strategy. Earnings stripping is the tax loophole Walgreens planned to use in achieving its estimated $4 billion in tax breaks over five years. This loophole must be closed to make inversions by companies such as Burger King not viable as tax avoidance schemes.
“The Administration’s initiative provides an incentive for Congress to act rather than continue to avoid action. This rule takes away some incentives to invert, but leaves some other critical ones in place. The most important anti-inversion legislation is the Stop Corporate Inversions Act, sponsored by Sen. Carl Levin and 22 other senators and by Rep. Sander Levin, which are endorsed in a recent letter by the Americans for Tax Fairness coalition. This should be a top priority when Congress returns during the lame-duck session.”
Americans for Tax Fairness is a diverse coalition of 425 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.