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Obama seeks to target overseas tax loopholes

Discussion in 'Alley of Lingering Sighs' started by Déise, May 6, 2009.

  1. Déise

    Déise Both happy and miserable, without the happy part!

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    There's been a lot of discussion in Ireland recently about the below:

    Obama to introduce tax reforms that target overseas loopholes

    I'd be interested in getting a US perspective on this. Is this purely an attempt to go after "nameplate" companies which have no commercial substance or is this an attempt to tax the overseas earnings of US firms? Obviously it would be popular with the public regardless but what are its realistic chances of getting through Congress?

    I'm largely looking at this from my own point of view. Ireland has a very low corporation tax rate (12.5%) which is one of its biggest advantages in attracting inward foreign investment. If this is rendered moot it could hit very hard. Revenue will seek to prevent blatant examples of abuse as this would obviously lead to actions from the country being deprived of revenue.

    Do people see this hurting US companies' competitiveness? Most countries do not tax overseas branches whose activities do not relate to the parent country's earnings.
     
  2. NOG (No Other Gods)

    NOG (No Other Gods) Going to church doesn't make you a Christian

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    Well, removing tax credits is perfectly justifiable, and I think should have been done years ago. I'm not familiar with the 'check the box' issue, so I don't know what kind of impacts this will have. In the US, though, overseas tax havens have been something of a boogey-man for blaiming all kinds of economic woes on for years, I just have no idea how accurate it is.

    Personally, I'm still a fan of the so-called 'fair tax bill'.
     
  3. Déise

    Déise Both happy and miserable, without the happy part!

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    I'm not sure what tax credits you're referring to, could you clarify exactly?

    Overseas tax havens are boogeymen the world over. There's a few different types. Some people move their residence abroad to countries like Monaco and only return periodically on holidays. The right of a country to tax someone who doesn't live there is weak, although I think the US does insist on it as a condition to retain US citizenship. Then there's those who use clever accountants to exploit loopholes to move their earnings out of the reach of the taxmen. No moral argument for this but realistically people will always find loopholes.

    The reason Obama's plan has been making the main headlines of all the papers over here is that it's been suggested Obama is going to go further than fighting against loopholes by actually taxing the overseas profits of companies. For example, Google's European HQ is in Dublin. All the profits attributable to it get taxed in Ireland, as it would be considered an Irish company. It is only taxed in the US on the money it sends ("remits") to the US parent. Usually the US will declare an amnesty every couple of years and allows companies to remit their profits at a very low tax rate. This is largely paper money in the accounts anyway. Obama may (or may not, it isn't clear) be planning on taxing companies on worldwide earnings regardless of whether the money is sent back. This would bring in a lot to the US Treasury but would see US companies being taxed twice on foreign earnings. It's not inconceivable that some would decide to move their HQ away from America, though that'd be a big step to take given that the US is the centre of the business world.

    I'm not sure how big this proposal is in America, I was just hoping to get a feel for it.

    The fair tax bill is the move to replace income taxes with consumption taxes, yes? I think my head hurts trying to figure out how that would interact with international corporate transfers. If anyone can explain it to me I would be interested in reading.
     
  4. The Great Snook Gems: 31/31
    Latest gem: Rogue Stone


    Adored Veteran

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    I thought this was a thread about Obama's cabinet :)
     
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