US TAX PLAN:US PRESIDENT Barack Obama's proposals to change tax rules for US companies operating overseas have met a sceptical response from leading Democrats and Republicans in Congress.
Montana Democrat Max Baucus, who chairs the Senate finance committee, called for “further study” of the proposals, which the White House claims would save US taxpayers $210 billion (€157 billion) over the next decade.
“I want to make certain that our tax policies are fair and support the global competitiveness of US businesses,” Mr Baucus said.
“It is true that other countries give favourable tax treatment to their companies, and we have to make sure we’re not shooting ourselves in the foot while trying to raise some revenue.”
Iowa’s Chuck Grassley, the top Republican on the committee, welcomed the president’s call for a crackdown on tax evasion but expressed concern that some of the proposals could harm US business. “There’s a big difference between abusive tax avoidance and legitimate tax policy that recognises the global economy,” he said. “To the extent the president continues on the road of cracking down on tax abuse, he can count on my support. But if he’s using tax shelters as a stalking horse to raise taxes on corporations at the cost of US jobs, he’ll lose me.”
Under Mr Obama’s proposals, which he outlined on Monday, US multinationals would still be able to defer paying US tax on profits earned overseas but would no longer be able to claim tax deductions in the US for expenses related to their foreign operations.
The president also wants to overhaul “check the box” rules that give companies great leeway in deciding where their subsidiaries should be taxed and to tighten rules on the use of foreign tax credits to avoid paying US tax on some earnings.
US business groups are gearing up for a major battle when the proposals go before Congress, arguing that the tax changes would make US firms less competitive in the global market.
Many Democrats support Mr Obama’s plan, however, as an important step towards greater fairness in the tax system. “Our tax code should reward companies that thrive by continuing to invest in America and American workers,” said Charlie Rangel, chairman of the House ways and means committee. “I applaud President Obama’s commitment to simplifying our tax code and look forward to working with the administration to close these loopholes.”
White House press secretary Robert Gibbs acknowledged that the opposition of business groups meant that the president faced a tough fight over his tax plans.
“I don’t think change is ever easy, and I think whenever you’re taking on some bigger interests, that mountain gets a little bit steeper,” Mr Gibbs said.
“But the president strongly believes in the policy that he outlined – the steps that we have to take to close tax loopholes and ensure some fairness in this process – is the right policy for America, and the right policy for American business.”
