May 8, 2009 01:49 PM | Permalink |
On May 4, President Obama proposed several measures to protect the U.S. tax system from offshore tax abuses. The proposed measures, which address both tax avoidance and tax evasion, are steps in the right direction but could be stronger. The additional details made public by the Treasury Department on May 11 provide more reason to be hopeful, but also illustrate certain gaps in the administration’s approach. For example, the President proposes to limit the rules allowing corporations to “defer” their U.S. taxes on foreign income. He would not repeal “deferral” altogether and he would largely exempt technology and pharmaceutical companies from even the weak limits he proposes. He proposes sensible steps to reduce abuses of the foreign tax credit and the “check-the-box” rules that allow multinational corporations to cause their subsidiaries’ income to “disappear.” His proposals to crack down on the use of secret accounts in offshore tax havens are also positive steps but could be much stronger.