By Patrick Temple-West
WASHINGTON Feb 20 The Obama administration said
on Thursday it will seek new limits on overseas tax avoidance by
corporations in its forthcoming budget proposal, reprising an
approach it has made before to try to raise government revenue
via a tighter corporate tax code.
With the U.S. Congress gridlocked over fiscal policy, past
efforts by Democratic President Barack Obama to crack down on
what he sees as offshore corporate tax loopholes have largely
failed. The latest measures could meet the same fate.
In its fiscal year 2015 budget, the administration will move
to keep corporations from cutting their bills by playing one
country's tax rules for hybrid securities off against another's,
an administration official said on Thursday.
The budget is scheduled to be released on March 4.
Additionally, under the new budget, some U.S. technology
companies would face new limits on their ability to shift
profits abroad by housing valuable software overseas, the
Some U.S. businesses move profits into low-tax jurisdictions
for reasons that have no economic benefit other than to avoid
taxes, said Jason Furman, chairman of the White House Council of
Economic Advisers, at a conference on Thursday.
"Such profit shifting is extensive," he said.
For companies that defer their profits by keeping them
offshore indefinitely, "the president's proposal in this regard
would be an international minimum tax," Furman said.
At the moment, big corporations must pay the top 35-percent
corporate tax on foreign profits, but not until those profits
are brought into the country from offshore. This exception is
known as corporate offshore income deferral.
In related news, the U.S. Treasury Department on Thursday
moved to shut the door on further 11th-hour tweaks to a new law
set to take effect on July 1 that is meant to fight offshore tax
evasion by American individuals.
The Foreign Account Tax Compliance Act (FATCA) was enacted
in 2010 and has undergone successive delays and revisions. Banks
even now say more time is needed to get ready for it.
But a Treasury Department statement said the largely
technical reporting changes released on Thursday are "the last
substantial package of regulations" needed to implement FATCA.
Treasury officials said the latest fixes would prevent
another delay to a law that has already been twice postponed.
An official told reporters: "We're going full-speed ahead
for getting this implemented by July 1. We don't see any likely
event that will cause us to change that."
Congress passed FATCA in response to a scandal involving
Americans hiding money in Swiss bank accounts. The law requires
foreign banks to share information about Americans' accounts of
more than $50,000 with the U.S. Internal Revenue Service.
Foreign institutions that fail to comply with FATCA face a
potential 30-percent withholding tax on U.S. source income that
could effectively freeze them out of U.S. financial markets.
The latest changes to the law are highly technical and
involve making it easier for some foreign financial institutions
to report customer information to the United States, addressing
the concerns of both U.S. and foreign banks.