U.S. Chamber Statement on Obama Administration's Tax Inversions Announcement

Monday, September 22, 2014 - 8:30pm

WASHINGTON, D.C.—U.S. Chamber of Commerce Chief Economist Dr. Martin Regalia issued the following statement today on the Obama administration’s announcement on tax inversions:

“There are three main reasons for a company to change its tax domicile: first, to remove future foreign source income from a secondary level of U.S. taxation, the territorial issue; second, to avoid the highest tax rate in the industrialized world on all income earned abroad; and, third, to access accumulated cash in the former U.S. foreign subsidiary via a series of loans through the new foreign parent.

“Treasury’s actions today will close off the third option and thus make inversions less profitable—but not unprofitable— for inverting companies that wanted to bring the cash held abroad back to the U.S. Inverting companies will still receive all of the benefits of the first two reasons for inverting. Moreover, if companies want to use the accumulated cash in the former foreign subsidiary, they can still do so. They just must use the proceeds abroad to create income and jobs abroad. In fact, the administration just assured that deferred income in the once foreign subsidiary will never come back to the U.S. to help create income, jobs, and economic growth here.

“Bad public policy produces bad economic results. Just look at what the policies of this administration have done to economic growth over the last five years. Capital flows to places where it is valued and well treated, and it avoids places where it is abused by onerous tax systems. The administration’s vain attempt to lock corporations in to an obsolete tax system will only serve to further lock capital out.

“Rather than piecemeal, onerous actions, the administration should undertake comprehensive tax reform that lowers rates for all businesses and shifts to an internationally competitive system that welcomes investment and produces the economic growth this country needs.”

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.