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News : US Economy Last Updated: Feb 24, 2012 - 8:29 AM


Obama proposes minimum overseas corporate tax rate; Ireland's low-tax regime/ tax haven incentives in peril
By Michael Hennigan, Finfacts founder and editor
Feb 23, 2012 - 8:21 AM

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The Obama Administration has proposed a minimum tax on profits of US companies in foreign jurisdictions that if implemented will reduce the attraction of Ireland's low-tax foreign direct investment regime and imperil the tax haven activities of high profile companies such as Microsoft, Google and Facebook.

President Obama on Wednesday proposed the first major reform of the US corporate tax system in a quarter century and outlined a plan to cut the headline corporate tax rate to 28% from the current level of 35% while eliminating several loopholes that cut tax bills.

The Administration said: "Our tax system should not give companies an incentive to locate production overseas or engage in accounting games to shift profits abroad, eroding the US tax base." It takes aim at Ireland's low-tax system by proposing a minimum tax on foreign earnings that would "discourage a global race to the bottom in tax rates."

It would also target the tax haven activities of US companies, which we outlined last week - - Finfacts Premium provides access to comprehensive research on tax havens and tax systems in the OECD (Organisation for Economic Cooperation and Development) developed world economies.

The Administration proposes that income earned by subsidiaries of US corporations operating abroad must be subject to a minimum rate of tax. It says this would "stop our tax system from generously rewarding companies for moving profits offshore. Thus, foreign income deferred in a low-tax jurisdiction would be subject to immediate US taxation up to the minimum tax rate with a foreign tax credit allowed for income taxes on that income paid to the host country.

This minimum tax would be designed to balance the need to stop rewarding tax havens and to prevent a race to the bottom with the goal of keeping US companies on a level playing field with competitors when engaged in activities which, by necessity, must occur in a foreign country."

No specific tax threshold has been proposed.

Bipartisan US tax reform is not welcome news in Ireland which is also facing pressure from Europe on preventing companies like Facebook, which books sales revenues generated in places like Germany in Ireland and pays tax on such sales to the Irish Government.

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

It's a simple fact that in the prevailing economic climate, the provision of high quality content cannot be sustained through advertising alone. 

Business executives who put a premium on time and value high quality information, should use our service.

The full article can be accessed here.

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