Maxine Fay Miller
Crack down on offshore tax breaks
08 May 2009
President Barack Obama has presented a set of tax proposals due to be introduced this week which would overhaul the US tax system and prevent illegal overseas tax evasion by companies and wealthy individuals. This new system would help raise $210 billion in revenue for the U.S. government over the next ten years.
Multinationals pay on average a tax rate of just 2% on their foreign revenue and some wealthy citizens hide their wealth in tax havens outside the U.S. While most Americans paid their fair share of taxes, Mr Obama said ’there are others who are shirking theirs, and many are aided and abetted by a broken tax system.’
If adopted this new system could lead to big changes in the way companies outsource work to countries such as India and Mexico. Critics of the new tax system say it could lead to job losses or higher prices as companies try to compensate for higher taxes.
Martin A. Regalia, Chief Economist of the United States Chamber of Commerce, argues that the new system will put U.S. companies at a disadvantage to their competitors.
However, President Barack Obama said ‘I want to see our companies remain the most competitive in the world’ but the way to do this is ‘not to reward companies for moving jobs off our shores or transferring profits abroad.’ Another aim of this proposal is to create jobs in the U.S.
In the UK Alistair Darling has increased the top tax rate to 50%. Subsequently, the publishing firm Informa has become the first UK company to react to the latest budget and move its tax domicile to Switzerland to avoid ‘double taxation’ on intellectual property. Adam Walker, the Finance Director of Informa said the move was carried out so Informa, whose publications include, Lloyds List and Routledge academic books, could remain competitive.