Obama Calls Inversions 'Insidious,' Praising Treasury Rules
(Bloomberg) President Barack Obama issued a forceful denunciation of companies that shield profit overseas through corporate inversions, praising new rules that would curb what he called one of the U.S. tax system’s most insidious loopholes.
“This is something that I’ve been pushing for a long time,” Obama said at the White House Tuesday, a day after the Treasury Department announced the new measures. “When companies exploit loopholes like this, it makes it hard to invest in the kinds of things that are going to keep America’s economy going strong.”
The rules, which would limit companies’ ability to participate in inversions if they’ve already done them within the past 36 months, could thwart a planned $160 billion merger between Pfizer Inc. and Allergan Plc. Allergan has been involved in repeated inversions, under which a U.S. company adopts a foreign tax address, a move that can reduce its American tax bill.
During his remarks Tuesday, Obama called inversions “one of the most insidious loopholes out there,” and emphasized the importance of restoring faith in the U.S. tax system. Republicans in Congress have called for addressing inversions in the context of comprehensive corporate tax reform. Obama, who has said inversions result from an “unpatriotic tax loophole,” faulted lawmakers for not having acted yet.
‘Favors the Wealthy’
“When politicians perpetuate a system that favors the wealthy,” he said, “it’s not surprising that people feel they can’t get ahead. It’s not surprising that that may produce politics” where people feel frustrated.
The Obama administration announced the rule just as Republican and Democratic voters prepared to go to the polls in Wisconsin, where presidential candidates from both parties are in close races in the state’s primary. Inversions have become a political flash point for both parties.
The Treasury Department’s move comes less than three weeks after Democratic Senator Bernie Sanders, who is seeking the party’s presidential nomination, sent a letter calling on Lew to “take action to block the corporate inversion planned by the pharmaceutical giant Pfizer.” Read more on Accounting Today.