Obama Announces US Crackdown On Inversion Tax ‘Loophole’

Obama announces US crackdown

The White House has announced a crackdown on tax avoidance deals known as inversions.The practice involves a US firm merging with a firm in a country with a lower tax rate and has become popular over recent years.

But President Barack Obama said new treasury department measures would make inversions less attractive.

Those include making it more difficult for an inverted company to access money made outside the US.

One way inverted companies do that is by making loans between foreign units and the US business.

The benefits of so called hopscotch loans will be removed, according to today’s announcement from the US Department of the Treasury.

The treasury department is also strengthening the requirement that the US owners of the new inverted firm have to earn less than 80% of the new entity.

It says that will mean some inversion deals “no longer make economic sense”.

“We’ve recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I’m glad that [Treasury Secretary Jack Lew] is exploring additional actions to help reverse this trend,” the president said in a statement.

In a recent inversion deal, Burger King bought Canadian coffee and doughnut chain, Tim Hortons.

Under the deal the new group moved its headquarters to Ontario, Canada, where the corporate tax rate is 26.5% – much less than the US rate of 35%.