In his strongest plea yet to close a popular corporate-tax dodge, President Obama blasted US companies that shift their tax domiciles overseas — known as inversions — for “gaming the system.”
“If you’re simply changing your mailing address to avoid paying taxes, you’re really not doing right by the country,” the president said in a CNBC interview on Thursday.
Never mind the loopholes are “technically legal,” he continued, corporate America “also gets paid to be good corporate citizens.”
US corporations have pulled this switcheroo — where they combine with smaller companies in tax-friendly countries — 85 times since 1983, which adds up to an inconsequential three companies a year.
That it’s gaining steam, though, is evident from the nine inversion deals either pending or completed so far this year — deals effectively exporting such hallmarks of the US landscape as Chiquita and Walgreens.
When US drug giant Pfizer made an unsuccessful play in May for British rival AstraZeneca — mostly to ditch a 40 percent effective tax rate here and benefit from the UK’s 21 percent corporate rate — the trend erupted into a full-blown controversy.
“This kind of strategy undermines people’s confidence in how companies are thinking about their responsibilities to the country as a whole,” Obama said.
The president acknowledged, nonetheless, that it’ll take tax reform to halt inversion altogether.
“We need to lower corporate tax rates and close corporate loopholes,” he said, before promising his administration is “four-square behind” such measures.
“The main thing that’s holding us back is inaction by the federal government.”