Statement from U.S. PIRG advocate Michelle Surka on new Treasury Department rule to limit multinational corporate tax avoidance:
“We applaud the step the Treasury Department has taken to curb the epidemic of corporate tax avoidance. Based on early analysis, the new rule introduced by the Treasury could recover close to $600 million worth of federal taxes lost to loopholes per year. Corporate tax avoidance costs us here at home, in the form higher tax rates for individuals and small businesses, cuts to public programs, and ballooning national debt. Today, corporations hold $2.5 trillion worth of profits offshore, totaling over $717 billion in lost tax revenue. If these companies are earning their profits in the U.S., they should pay their taxes here too.
This new rule reduces the incentives for corporate inversions by addressing earnings stripping, which is a financial gimmick whereby U.S. corporate subsidiaries borrow from their own foreign subsidiaries, charging high fees and interest on the debt in order to cut down their U.S. taxable income.
The Treasury’s new rule is a vital step in the right direction, but if we want to see real improvement, Congress should take even bolder steps to shut the door on all incentives for tax haven abuse by putting an end to deferral.”
Read more about the extent of corporate tax haven abuse in Offshore Shell Games 2016.
Read the Treasury’s press release regarding the new rule here.