Hey, Corporate America: You want your foreign tax credits? Barack Obama’s got your foreign tax credits right here. But first, you’ll need to show him the money.
That’s right. The president and the U.S. Treasury Dept. just closed a gaping loophole that lets corporations screw U.S. taxpayers three times over: first by moving jobs overseas, then by keeping the profits they earn from U.S. consumers in their host country, and then by using foreign tax credits to avoid paying U.S. taxes.
To hell with that. Bloomberg reports:
Treasury officials said they would disallow corporations from using foreign tax credits unless the companies actually bring home to the U.S. — or repatriate — the overseas earnings on which they’ve paid the foreign taxes. Repatriation triggers the 35 percent U.S. corporate tax rate, one of the highest in the world — and foreign tax credits can reduce or eliminate it. Treasury officials are worried that companies are claiming artificially inflated foreign tax credits tied to offshore money they haven’t brought home.
This comes on the heels of the European Union (EU) ordering Apple Inc. to pay $14.5 billion — plus interest — in back taxes to Ireland. As it turns out, Ireland offered Apple a sweet deal, but the EU wasn’t down with Ireland flouting state aid rules.
Alas, the U.S. has been perfectly happy to let rich corporations cheat our citizens out of a decent standard of living. Accounting Today explains that under current tax laws, Apple can probably get away with taking Ireland’s back taxes out of our hide by claiming a foreign tax credit.
That’s right. Apple moved jobs out of our country to avoid paying their fair share in taxes, the EU didn’t let them get away with it, and now they expect to write off that $14.5 billion here in the U.S. Even though we haven’t seen a single penny of what they keep in Ireland.
Not so fast. As Bloomberg points out, U.S. treasury officials grew concerned when they realized Apple’s $14.5 billion is just the tip of the iceberg. We stand to lose more than $2 trillion from these bogus corporate foreign tax credit write-offs. Mark Mazur, the U.S. Treasury’s assistant secretary for tax policy, told reporters the buck stops here.
“Today’s action protects the U.S. tax base by ensuring that such credits are only available when corporations repatriate their foreign earnings.”
The GOP keeps whining and howling about our deficit and budget shortfalls. But they won’t have that excuse once these tax repatriations add a couple trillion to our coffers. And, mind you, this clarification in tax rules doesn’t eliminate foreign tax credits, just the improper use of them.
Cracking down on foreign tax credits doesn’t go far enough.
While cracking down on foreign tax credits is a great move, top economist Robert Reich says we can do a lot more to reduce corporate tax dodging. The former labor secretary for President Bill Clinton argues:
Corporations that desert America by sheltering a large portion of their profits abroad or moving their headquarters to another country should no longer be entitled to the advantages of being American.
If these unpatriotic corporations choose to leave the U.S. to avoid paying their fair share in taxes, we should ban them from lobbying Congress, contributing to U.S. political campaigns, advising U.S. government agencies, and suing foreign companies in our courts. On top of that, Robert Reich says, “their assets around the world shouldn’t any longer be protected by the U.S. government.”
If their factories and equipment are expropriated somewhere around the world, they shouldn’t expect the United States to negotiate or threaten sanctions, or use our armed forces to protect their investments. And if their intellectual property—patents, trademarks, trade names, copyrights—are disregarded, that’s their problem too. Don’t expect any help from us.
Nor should we even consider their interests in trade and climate negotiations, international disputes, or treaties.
They don’t get to be represented by the U.S. government because they’re no longer American.
Boom. “It’s simple logic.” If businesses decide not to be American, they should no longer enjoy the advantages of being American.
Watch: Robert Reich on corporate tax desertion.
Featured image: Evan Vucci via Getty Images.