As published on internationalinvestment.net, Wednesday October 9, 2019.
The Trump administration is considering rolling back an Obama-era tax rule aimed at cracking down on offshore tax deals, Bloomberg reported.
The Obama-era rules were aimed at preventing American companies from moving offshore to avoid US taxes. Treasury Department officials are weighing narrowing the regulations or repealing them and replacing them with new rules that would be more business-friendly.
Two options are under consideration: Narrowing regulations, and repealing them entirely.
In 2016, then-President Obama's Treasury Department issued rules that were aimed at preventing US companies from corporate inversions: moving their headquarters overseas for tax purposes after merging with foreign companies .
The moves may make it easier for companies to minimize US earnings and inflate foreign profits that are taxed at lower rates. The rule Treasury is reportedly considering changing was designed to go after a tax-avoidance strategy companies often used after inverting known as "earnings stripping." Under this strategy, companies would move US earnings to lower-tax countries through the use of debt.
Lobbyists argue that the 2017 corporate tax cut makes inversions less attractive. Modifying the regulations, commonly referred to as the debt-equity rules, would also count as one of President Donald Trump's favorite kinds of policy: reversing a regulation introduced in the final days of President Barack Obama's term.