Van Hollen Calls On Treasury Department To Stop Corporate Inversions
Today U.S. Senator Chris Van Hollen (D-MD) and eleven of his Senate colleagues called on the U.S. Department of the Treasury to reject calls to eliminate, undermine, or scale back anti-tax inversion and earnings stripping efforts and work with Congress to curb these abusive tax avoidance schemes for good. Inversions are corporate deals that allow U.S. companies to shift their corporate citizenship from the United States to a low-tax foreign jurisdiction, even while keeping their executives and headquarters in the United States. This is accomplished by merging with a foreign company that can be as little as 1/5 of the size of the U.S. corporation and results in large and permanent tax breaks. Unlike other tax loopholes that can be closed on a year-to-year basis, a tax inversion is a permanent change in a corporation’s structure.
“If a company benefits from the United States and all that it has to offer, it should pay its fair share of taxes here at home. We urge you to reject calls to eliminate or undermine the rule [Section 385 rule] so we can begin to restore some fairness to our tax system on behalf of the American people,” the senators wrote in a letter to Treasury Secretary Steven Mnuchin.
Profit shifting by U.S. companies costs the U.S. treasury more than $100 billion each year, and according to projections in the Congressional Budget Office’s Budget and Economic Outlook: 2017 to 2027 report, inversions and other tax-avoidance strategies will only increase over the next ten years, resulting in the loss of much needed federal revenue.
In addition to Senator Van Hollen, the letter was signed by U.S. Senators Dick Durbin (D-IL), Jack Reed (D-RI), Tammy Baldwin (D-WI), Al Franken (D-MN), Ed Markey (D-MA), Jeff Merkley (D-OR), Dianne Feinstein (D-CA), Mazie Hirono (D-HI), Bernie Sanders (I-VT), Cory Booker (D-NJ), and Tammy Duckworth (D-IL).
Full text of the letter is available here and below:
Dear Secretary Mnuchin:
We write in support of the Department’s efforts to limit tax inversions and earnings stripping. To date, these rules have had measureable success in stemming the tide of inversions, but they alone will not be effective in ending these offshoring tactics. Given the recent decrease in inversion activity and ongoing efforts to reform the nation’s broken tax system, we urge you to reject calls to eliminate, undermine, or scale back the Section 385 rule and work with us to curb these abusive tax avoidance schemes for good.
Inversions are corporate tax deals that allow U.S. companies to move their tax domicile overseas – but only on paper – to avoid paying U.S. taxes. These schemes are deeply unfair to American taxpayers who fund the programs and protections that many of these corporations use to grow and thrive as they make significant profits. In return, these corporations choose to desert their tax responsibility here at home, further eroding the U.S. tax base. Profit shifting by U.S. companies cost the U.S. treasury more than $100 billion each year, and according to projections in the Congressional Budget Office’s Budget and Economic Outlook: 2017 to 2027 report, inversions and other tax-avoidance strategies will only increase over the next ten years, resulting in the loss of much needed federal revenue. Limiting the ability for these companies to engage in earnings stripping is an important step in limiting tax inversions and preserving the U.S. tax base and tax fairness.
In 2004, Congress acted to prevent these types of deals. However, dozens of corporations have used loopholes in the law to avoid U.S. taxes. In the absence of congressional action to close these loopholes and projections that tax-avoidance schemes will worsen over the next few years, the Department issued rules to reduce incentives to invert. As a result, a number of companies rightly abandoned or questioned the benefits of their inversion efforts. Eliminating or undermining this rule and any other anti-inversion regulations will inevitably create an environment that is ripe for more frequent and sizable corporate inversions.
As Congress continues to weigh reform of the nation’s broken tax system, it is incumbent upon the Department to use its authority to strengthen the anti-inversion rules, not weaken or repeal them. Moreover, we should be working together to put an end to these reckless practices that drains much needed revenue from our Treasury.
If a company benefits from the United States and all that it has to offer, it should pay its fair share of taxes here at home. We urge you to reject calls to eliminate or undermine the rule so we can begin to restore some fairness to our tax system on behalf of the American people.
Sincerely,