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Obama announces US crackdown on inversion tax 'loophole' | Obama announces US crackdown on inversion tax 'loophole' |
(about 21 hours later) | |
The White House has announced a crackdown on tax avoidance deals known as inversions. | The White House has announced a crackdown on tax avoidance deals known as inversions. |
The practice involves a US firm merging with a firm in a country with a lower tax rate and has become popular over recent years. | The practice involves a US firm merging with a firm in a country with a lower tax rate and has become popular over recent years. |
But President Barack Obama said new treasury department measures would make inversions less attractive. | But President Barack Obama said new treasury department measures would make inversions less attractive. |
Those include making it more difficult for an inverted company to access money made outside the US. | Those include making it more difficult for an inverted company to access money made outside the US. |
One way inverted companies do that is by making loans between foreign units and the US business. | One way inverted companies do that is by making loans between foreign units and the US business. |
The benefits of so called hopscotch loans will be removed, according to today's announcement from the US Department of the Treasury. | The benefits of so called hopscotch loans will be removed, according to today's announcement from the US Department of the Treasury. |
The treasury department is also strengthening the requirement that the US owners of the new inverted firm have to own less than 80% of the new entity. | |
It says that will mean some inversion deals "no longer make economic sense". | It says that will mean some inversion deals "no longer make economic sense". |
"We've recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I'm glad that [Treasury Secretary Jack Lew] is exploring additional actions to help reverse this trend," the president said in a statement. | "We've recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I'm glad that [Treasury Secretary Jack Lew] is exploring additional actions to help reverse this trend," the president said in a statement. |
In a recent inversion deal, Burger King bought Canadian coffee and doughnut chain, Tim Hortons. | In a recent inversion deal, Burger King bought Canadian coffee and doughnut chain, Tim Hortons. |
Under the deal the new group moved its headquarters to Ontario, Canada, where the corporate tax rate is 26.5% - much less than the US rate of 35%. | Under the deal the new group moved its headquarters to Ontario, Canada, where the corporate tax rate is 26.5% - much less than the US rate of 35%. |
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