Barack Obama on Thursday in Los Angeles attacked US firms for using so-called tax inversions where they move their address/ tax residency to countries like Ireland which he called "cherry-picking the rules" and damaging the country's finances and the economy. In a CNBC interview the president cited Ireland by name.
Obama said that these companies, which buy foreign firms to technically change their tax domicile to a country with a lower tax rate, benefit from America's university system and infrastructure, but then turn around and "game the system." He told CNBC that despite the legality of this corporate practice, inversions are not fair.
"There are a whole range of benefits that have helped to build companies, create value, create profits," he added. "For you to continue to benefit from that entire architecture that helps you thrive, but move your technical address simply to avoid paying taxes, is neither fair, nor is it something that's going to be good for the country over the long term."
Obama also said that "now is the time" for his administration to tackle corporate tax reform.
The White House says that [a corporate "inversion" is what happens when a US-based multinational with operations in other countries restructures itself so that the US "parent" is replaced by a foreign corporation - - and usually one that's in a country with a lower tax rate than the United States. As a result, on the whole, this means that corporate income tax that would otherwise be paid to the United States ends up going overseas.
Earlier this year the Administration urged Congress to raise the 20% limit to 50% but Republicans say that they would prefer to have comprehensive tax reform rather than individual amendments.
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