President Obama is Speaking Out on “Tax Inversions”
It is no secret that many of the most successful companies found within the U.S. today are working to hold tight of as much of their profits as they can without being penalized by the IRS and having to pay out more in taxes than they would like. Many have in fact found a “loophole” to do so, and that is through tax inversion. This “financial exercise” is used by many of the most well-known companies such as Medtronic and Burger King, who have managed to make other countries home to their companies as opposed to the U.S., which is where they are predominantly located.
Tax attorneys in Washington note that this effort these major companies have managed to take part in may be coming to a halt as the Treasury Department along with President Obama believe they too should be be faced with having all of their income taxed just as every other person and small business owner does each and every year. But why would these companies want to take their roots elsewhere and label it as something it truly isn’t?
According to Bloomberg News, “the U.S. corporate income tax rate” is at 35 percent, which stands as the “highest in the developed world.” The U.S. also subjects the companies to pay that rate even for profits made outside of the country. Therefore, when a company “relocates their business interests on paper to take advantage of lower overseas tax rates” while still maintaining the profits being made in the U.S., they are then subjected to paying less tax to the IRS. For example, Burger King, which was originally developed in Miami, Florida, is now recognized as a Canadian company.
Tax lawyers in Washington also highlight the concern President Obama has for this tactic as he recognizes it as “one of the most insidious tax loopholes out there.” He took the time, though, to praise the Treasury Department as they have increased their efforts to reduce the number of companies trying to relocate their business in order to avoid paying more of a percentage for the income they took in. President Obama has also called on to Congress “to close the loophole for good.” WBRC Fox 6 News noted that this practice these companies engage themselves in not only diminishes the amount that the government can spend on schools and other aspects that promote a strong economy, but also affects the middle class because this “lost revenue has to be made up somewhere.”
As Congress and the Treasury Department have taken initiative to decrease the number of companies who are trying to get in on this loophole and avoid paying taxes on their profits, they have set new regulations in which all companies must abide by. Washington tax legal representatives acknowledge these actions as a push to help promote a fairer system when it comes to paying taxes for all citizens in the U.S.
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