Friday, July 25 10:10:00
US President Obama last night slammed US multinationals who use so-called tax inversion scheme to re-domicile outside the US for tax purposes, singling out Ireland as a "tax inversion" destination.
He criticised US firms for "gaming the system" by relocating their headquarters to countries such as Ireland where corporate tax rates are lower to avoid taxes in the US, where the corporate rate can be as high as 35pc compared to Ireland's 12.5pc baseline rate.
In his administration's most high-profile attack on a practice known as "inversions" that more and more US companies have recently used to reduce their taxes, Mr Obama said in a speech in California that US corporations were exploiting an "unpatriotic tax loophole” by moving their head offices overseas in takeovers of smaller foreign companies.
The president, in an interview broadcast later on the business news TV network CNBC, named Ireland as a location that US companies are using to take advantage of "technically legal" tax arrangements.
"What we are trying to do is to say that if you simply acquire a small company in Ireland or some other country to take advantage of the low tax rate [and] you start saying, 'we are now magically an Irish company', despite the fact that you might have only 100 employees there and you have got 10,000 employees in the United States, you are just gaming the system," he said. "You are an American company."
"For you to benefit from the entire architecture that helps you thrive but move your technical address simply to avoid paying taxes is neither fair, nor something that's going to be good for the country over the long term," President Obama said in the exclusive interview. The president said he also is eager to begin a longer-term effort toward a sweeping tax reform plan that would not just lower the tax rate, but close loopholes.
But some analysts in the US see the efforts to pass legislation against so-called inversions failing, though it may encourage some dealmakers to hold off on some high-profile deals to stay out of the political crossfire.
"All of this stuff hits the brick wall in the House," said Greg Valliere, chief political strategist at Potomac Research. "I don't gather any momentum in the House to do a stand-alone bill. If they start doing it this way, they remove any hope of comprehensive tax reform. That's the view of House Republicans."
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