With the U.S. Congress gridlocked over fiscal policy, past efforts
by Democratic President Barack Obama to crack down on what he sees
as offshore corporate tax loopholes have largely failed. The latest
measures could meet the same fate.
In its fiscal year 2015 budget, the administration will move to keep
corporations from cutting their bills by playing one country's tax
rules for hybrid securities off against another's, an administration
official said on Thursday.
The budget is scheduled to be released on March 4.
Additionally, under the new budget, some U.S. technology companies
would face new limits on their ability to shift profits abroad by
housing valuable software overseas, the official said.
Some U.S. businesses move profits into low-tax jurisdictions for
reasons that have no economic benefit other than to avoid taxes,
said Jason Furman, chairman of the White House Council of Economic
Advisers, at a conference on Thursday.
"Such profit shifting is extensive," he said.
For companies that defer their profits by keeping them offshore
indefinitely, "the president's proposal in this regard would be an
international minimum tax," Furman said.
At the moment, big corporations must pay the top 35-percent
corporate tax on foreign profits, but not until those profits are
brought into the country from offshore. This exception is known as
corporate offshore income deferral.
In related news, the U.S. Treasury Department on Thursday moved to
shut the door on further 11th-hour tweaks to a new law set to take
effect on July 1 that is meant to fight offshore tax evasion by
The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010
and has undergone successive delays and revisions. Banks even now
say more time is needed to get ready for it.
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But a Treasury Department statement said the largely technical
reporting changes released on Thursday are "the last substantial
package of regulations" needed to implement FATCA.
Treasury officials said the latest fixes would prevent another delay
to a law that has already been twice postponed.
An official told reporters: "We're going full-speed ahead for
getting this implemented by July 1. We don't see any likely event
that will cause us to change that."
Congress passed FATCA in response to a scandal involving Americans
hiding money in Swiss bank accounts. The law requires foreign banks
to share information about Americans' accounts of more than $50,000
with the U.S. Internal Revenue Service.
Foreign institutions that fail to comply with FATCA face a potential
30-percent withholding tax on U.S. source income that could
effectively freeze them out of U.S. financial markets.
The latest changes to the law are highly technical and involve
making it easier for some foreign financial institutions to report
customer information to the United States, addressing the concerns
of both U.S. and foreign banks.
(Editing by Kevin Drawbaugh)
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