President Obama Takes Aim At Offshore Tax Dodges

From the LA Times.com:

President Obama said this morning that he plans to crack down on American companies that legally avoid U.S. tax obligations by investing money in countries with lower tax rates.

He also plans to eliminate tax deductions for companies that achieve similar breaks by sending jobs overseas, while extending the deduction for those who create domestic jobs.

The practice of "offshoring" cheats other taxpayers, the president said, and those who circumvent the system are "aided and abetted by a broken tax system" that he pledged to fix.

Speaking to reporters in the Grand Foyer of the White House, Obama said he doesn't think companies should be rewarded more for creating a job in Bangalore, India, than for creating one in Buffalo, N.Y.

"I want to see our companies remain the most competitive," the president said, while not rewarding them for moving jobs overseas.

The president's plans could yield an additional $210 billion in tax revenue over the next decade, according to the administration.

Obama's plans 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.

He also is asking for money to hire 800 Internal Revenue Service agents charged with improving enforcement.

The president today called on Congress to pass "common sense" measures, including one that would require overseas banks to provide information about how much U.S. corporations invest. If they won't cooperate, Obama said, the law should assume that those banks are sheltering money for investors.

During the presidential campaign, Obama spoke frequently about ending offshoring practices, often joking about a building in the Cayman Islands that supposedly houses thousands of corporations. As a candidate, Obama promised to scale back tax breaks for U.S. companies that send jobs overseas and give them instead to those who create jobs in the U.S.

Geithner Pledges ‘Ambitious’ Crackdown on Tax Havens

From Bloomberg.com:

Treasury Secretary Timothy Geithner said the U.S. government will mount an “ambitious” program to crack down on companies that use offshore locales to avoid paying taxes.

Closing loopholes and hunting tax evaders are especially important at a time when the economy is deteriorating and the government is running a record budget deficit, Geithner told the Senate Finance Committee today in Washington.

“We’re going to have a much more ambitious effort to deal with offshore tax havens,” Geithner said in response to questions from the panel. Allowing companies and individuals to escape paying their share “isn’t fair, particularly given the scale of the fiscal challenges we inherited,” he said.

A congressional report released in January found that in 2007 83 of the 100 largest publicly traded U.S. companies had units in low-tax or no-tax jurisdictions like the Cayman Islands or the Isle of Man. They included American International Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley, all of which were given taxpayer money through the $700 billion financial rescue.

Some of Geithner’s counterparts in Europe have vowed to take similar action, and the issue may be discussed when finance ministers for the Group of 20 industrial and developing nations meet next week in the U.K.

Yesterday, German Finance Minister Peer Steinbrueck said Switzerland should change laws that shield foreign tax dodgers from investigation in their home countries.