Trump Administration Rolls Back Obama-Era Rules Stopping Businesses From Moving Abroad To Lower Taxes
President Donald Trump‘s administration announced Thursday that it would scale back rules implemented under Barack Obama that were intended to stop American businesses from relocating abroad to lower their tax burdens.
Treasury Department officials said the regulations are unnecessary because of alterations created as part of the Republican tax plan Trump signed into law in 2017. The overhaul cut taxes for U.S. companies and contained provisions designed to promote international investments like mergers with foreign organizations.
“Because tax cuts made our business environment more competitive, we are now able to remove regulatory burdens that have been rendered obsolete, further reduce costs for job creators and hard-working Americans, and protect the U.S. tax base,” Treasury Secretary Steve Mnuchin said in a press release, in which he added that the 2017 tax law “leveled the playing field for American businesses.”
The Obama administration had first introduced the rules regarding corporate inversions abroad in April 2016, citing Pfizer’s $150 billion purchase of Dublin-based drug maker Allergan. The Treasury Department at the time also moved to stop earnings stripping, a practice that involves American subsidiaries borrowing from their parent companies abroad and using the interest payments on these loans to offset earnings. This expense is not logged on financial statements but reduces taxes. Obama’s White House pushed to curb this effort by classifying it as stock-based rather than debt-based, thus scrapping the interest deduction for American businesses.
Many experts quickly noted that there is little evidence to show that the 2017 tax law has led to a sharp decrease in outsourcing of American products, services and jobs to lower-cost nations. Several Democratic lawmakers, including Sen. Ron Wyden (D-Oregon), condemned the Trump administration’s roll-back of the Obama-era rules regarding inversions.
The corporations that got a massive taxpayer handout are getting another gift from Donald Trump. Weakening these rules just provides an opening for corporations to dodge taxes and get away with not paying their fair share. https://t.co/vU1Eavz8C8
— Ron Wyden (@RonWyden) November 1, 2019