Monday, Pres. Barack Obama said he would find and pursue US tax evaders and go after their offshore tax shelters. He announced a series of steps to overhaul the US tax code and to hire hundreds of new federal tax agents.
Specifically, Obama wants to prevent US companies from deferring or eliminating tax payments to the US by keeping profits in foreign countries. He wants more transparency in bank accounts and said, ‘If financial institutions won’t cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly.’
His goal is not to make trouble for US corporations doing business abroad, but to generate $210 billion in new taxes over the next 10 years and make it easier for companies to create jobs within the US. Under his plan, companies would not be able to write off domestic expenses for generating profits abroad.
He made clear that he does not want to repeal all overseas tax benefits but to create a start, or downpayment ‘on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations.’ The current code, he feels, makes it too easy for companies to abuse overseas tax havens and avoid paying any taxes.
Under existing laws, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. If they keep the profits offshore, they can defer paying taxes indefinitely. Obama’s plan, which would take effect in 2011, would change that.
Obama’s plan would:
* Eliminate some tax deductions for companies that earn profits in countries with low tax rates.
* Make permanent a research and experimentation tax credit, which is offered for creating domestic jobs.
* End a loophole that allows corporations to avoid taxes by reporting to the U.S. government that they’re paying taxes in foreign countries and then telling the foreign countries that they’re paying here.