WASHINGTON — The U.S. Treasury Department under Obama is going to cut down on a corporate tax loophole known as tax “inversion.”
Reuters reported that the Treasury Department will try to prevent U.S. companies from avoiding paying U.S. corporate taxes by buying foreign companies and then declaring citizenship of that foreign companies’ home country.
There was no discussion of lowering the U.S. corporate tax rate, which some say is far too high among Western economies and is not friendly to businesses.
The rules are effective immediately, said Reuters, and would apparently reduce the tax benefits that are available to companies that have inverted before the rule was in place. The Reuters article said that this makes inversions harder to accomplish for U.S. companies.
Burger King’s purchase of the Canadian coffee-and-donut chain Tim Hortons could be affected, but a Burger King spokesman did not comment to Reuters.
U.S. President Barack Obama said, announcing the rule, that it would “discourage companies from taking advantage of corporate inversions – moving their tax residence overseas on paper to avoid paying their fair share in taxes here at home.”