Obama Cracks Down on Corporate Inversions

(CN) - With Burger King moving its headquarters to Canada, U.S. officials announced new steps to discourage corporate inversions that avoid U.S. taxes.

The measures Treasury Secretary Jacob Lew announced Monday include a legislative plan in the federal budget to reduce incentives for inversions and make them more difficult.

"Today's action eliminates certain techniques inverted companies currently use to gain tax-free access to the deferred earnings of a foreign subsidiary, significantly diminishing the ability of inverted companies to escape U.S. taxation," the Department of the Treasury sad in a statement. "It also makes it more difficult for U.S. entities to invert by strengthening the requirement that the former owners of the U.S. company own less than 80 percent of the new combined entity. For some companies considering mergers, today's action will mean that inversions no longer make economic sense."

Lew has been urging Congress to enact anti-inversion legislation since July, noting that that avenue is "the only way to rein in" the inversions.

Republicans have resisted implementing such legislation.

"While comprehensive business tax reform that includes specific anti-inversion provisions is the best way to address the recent surge of inversions, we cannot wait to address this problem," Lew said. "Treasury will continue to review a broad range of authorities for further anti-inversion measures as part of our continued work to close loopholes that allow some taxpayers to avoid paying their fair share."

After the announcement, President Barack Obama again asked Congress to reform the tax code, including lowering the corporate tax rate, closing loopholes and simplifying the tax code.

"While there's no substitute for Congressional action, my Administration will act wherever we can to protect the progress the American people have worked so hard to bring about," Obama said in a statement. "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 Secretary Lew is exploring additional actions to help reverse this trend."

Rep. Sandy Levin and Sen. Carl Levin, both Democrats from Michigan, applauded the Treasury's action. The congressmen had authored earlier legislation to close the corporate-tax-inversion loophole.

"The administration is taking important and necessary steps to stem the tide of inversions in the wake of Republicans' refusal to act," said Levin, ranking member of the House Ways and Means Committee. "Corporate inversions are costing the U.S. billions of dollars in lost tax revenue and putting an increasing burden on American taxpayers, who cannot just move their addresses overseas to avoid taxes. While administrative action is vital, it is clear that a full and lasting solution can only come from Congress. I'm hopeful that Republicans will see the need for immediate action on inversion legislation when Congress returns."

Burger King made headlines last month with its controversial takeover of Canadian coffee-and-doughnut chain Tim Hortons, enabling it to move its headquarters out of the country.

Follow @davejourno

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