Obama on Offshore Tax Avoidance

Pres. Obama unveiled a far-reaching set of proposals on Monday that are aimed at the tax benefits enjoyed by companies and rich folks harboring cash in offshore accounts. He called for an end to that practice and the elimination of loopholes that allow U.S.-based multinational corporations and individuals to legally avoid paying billions in taxes through hidden accounts.

From The NYT: These steps, he said, would be the first in a much broader effort to fix a “broken tax system.”

The proposed tax overhaul, which will be detailed later this week…could help raise $210 billion in revenue over 10 years…

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.” Multinationals, he said, paid an average tax rate of just 2 percent on their foreign revenues. And some wealthy individuals hid their fortunes in foreign tax havens.

The president thus set up a frontal clash with big business over the tax advantages enjoyed by companies with extensive overseas operations….The president hopes to remove the competitive advantage for companies that invest and create jobs overseas, working to replace their tax advantages with incentives to produce jobs in the United States.

[S]everal large businesses have opposed the proposal. About 200 companies and trade associations, including Microsoft, General Electric and the United States Chamber of Commerce, signed a letter stating that the proposed tax changes would put them at a disadvantage with their rivals.

Many of the tax proposals will require Congressional approval and, if passed, none would take force before 2011.

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