Us New Regulations To Combat Multinational Tax Avoidance Will Reduce Tax Incentives

The US Treasury has announced a new package of measures aimed at curbing the phenomenon of US companies moving overseas to evade domestic high corporate taxes. The new measures will reduce tax concessions that have been acquired by overseas mergers and acquisitions, and make new tax avoidance activities more difficult and less profitable. This is the latest action taken by the US government to solve the pressing problem of the increasingly intensified transnational tax avoidance.

The new measures will prevent us companies from acquiring offshore income without paying taxes on US domestic enterprises, making it difficult for companies to engage in tax upside down and to split their branches overseas. The so-called "tax inversion" means that under the existing tax system in the United States, after acquiring overseas companies, the US local companies move their headquarters overseas to become foreign companies and evade the higher corporate tax in the country. Many companies use this channel to transfer corporate headquarters to countries with low or almost zero tax revenue through cross-border mergers and acquisitions.

According to The Associated Press, the new measures include the following: first, banning "jump house" loans. The "hopscotch" loan refers to the transfer of income from the US company to the new foreign head office. Secondly, we should tighten up the application of a relevant regulation, which stipulates that the shareholders of US companies shall not exceed 80% of the shares of the new transnational corporations after they are acquired, otherwise they will still be regarded as American enterprises, and then they will not be able to enjoy the tax preference of foreign enterprises. It is reported that the US government expects to further reduce this proportion to 50%, but this needs to be passed from the legislative procedure. Although the idea has not yet been approved by the legislature, the US government says the new measure will still make it difficult for US companies to meet the 80% ceiling, because these measures include prohibiting US companies from making high dividend payout before mergers and acquisitions to reduce their specific size in written form. In addition, the new regulations also impose strict restrictions on foreign enterprises' use of foreign capital and loans, so as to avoid "empty foreign companies" in the best way.

It is reported that the new measures will take effect immediately from the date of publication. According to a US Treasury official in a conference call with the media, the M & a transaction completed before 22 days will not be affected, and after that the transaction will be restricted by new measures. This means that the new measures may be troubling enterprises that have some tax reversed plans but have not yet done so.

The United States is one of the countries with the highest corporate tax burden in the world, with a federal enterprise tax rate of about 35%. According to statistics, since the early 80s of last century, there are about 50 cases of tax inversion. In the past ten years, dozens of American companies have moved their tax returns overseas, most of which occurred after 2008. Recent moves by big businesses include the fast food businesses, Burger King, and Tim Horton, the biggest coffee chain in the United Kingdom, in order to move their headquarters to Canada.

Jacob Lu, the US Treasury Secretary, said the tax inversion was unfair to other taxpayers, especially small businesses, and eroded the corporate tax base of the United States. In a statement issued on 22, he said that the new regulations of the Ministry of finance would force us companies to think twice about the issue of relocation of headquarters, because the new measures would reverse the tax and no longer have economic benefits. Therefore, these first targeted measures have made significant progress in restricting the evasion of tax obligations of American enterprises. He also appealed to Congress to revise the existing law as soon as possible and eliminate the possibility of tax avoidance by "fake foreign enterprises" at the legal level. In addition, he said,

US President Obama also issued a statement on the 22 day to support the decision of the Ministry of finance. He said, "I'm glad to see that." Treasury Department To explore new initiatives to curb this trend, I believe that the latest measures of the Ministry of finance will crack down on the enthusiasm of enterprises to take advantage of tax loopholes.

The Ministry of Finance cracked down on Transnational tax avoidance The new measures coincided with the growing concern of the US Congress over the past few months. The Democratic Party is urging action on legislation as soon as possible, but Republicans are inclined to postpone until 2015 to solve this problem as part of a broader reform of the loopholes in the federal tax law. With regard to this new measure, Republicans say that the US government should try to reform the tax law rather than punish enterprises in view of the high corporate tax rate in the US.

However, though U.S.A The two parties have different opinions on the time to solve this problem, but both sides have indicated that the inversion of tax is one of the manifestations of the loopholes in the US tax law, and we should thoroughly rectify and reform the tax law. Democratic Senator Charles Schulmer pointed out that the new measures did not abolish all the advantages of tax inversion. Only by preventing the loss of corporate revenues and strictly defining the legislation of tax inversion can we completely curb the tax inversion behavior, otherwise the tax inversion behavior may continue. Olin Hacci, a Republican of the Senate Finance Committee, said in a statement that any permanent solution to the problem of tax inversion must eventually be passed by Congress. Obama said that in the next few weeks to a few months, the United States will embark on a more equitable tax law to help American businesses grow and create more jobs.