Obama Blames Accountants for Inversion Trend

[kcjenkins]

Washington, D.C. (August 7, 2014)
By Michael Cohn

 

President Barack Obama put the blame on accountants for the wave of companies doing tax inversions.

During a press conference Wednesday following a summit with African leaders, Obama said, “You have accountants going to some big corporations—multinational corporations but that are clearly U.S.-based and have the bulk of their operations in the United States—and these accountants are saying, you know what, we found a great loophole—if you just flip your citizenship to another country, even though it’s just a paper transaction, we think we can get you out of paying a whole bunch of taxes.”

 

In contrast, an article in The Wall Street Journal on Wednesday attributed the trend to the legal profession, describing how the international law firm Skadden, Arps, Slate, Meagher & Flom persuaded a number of corporate clients to do inversions, with the help of banks such as J.P. Morgan Chase and Deutsche Bank. So far, many of the deals have occurred among pharmaceutical companies such as AbbVie's recent acquisition of Shire in the United Kingdom. On Wednesday, Walgreen's CEO announced that his company plans to acquire the rest of the European drug store chain Alliance Boots, but its tax address will remain in the U.S.

 

Obama argued that inversions place an unfair burden on other taxpayers.

“Well, it’s not fair. It’s not right. The lost revenue to Treasury means it’s got to be made up somewhere, and that typically is going to be a bunch of hardworking Americans who either pay through higher taxes themselves or through reduced services. And in the meantime, the company is still using all the services and all the benefits of effectively being a U.S. corporation; they just decided that they’d go through this paper exercise.”

 

 

Obama pointed out that there is a bill in Congress that would help prevent inversions, but he said his administration is also looking into what it can do.

 

“So there is legislation working its way through Congress that would eliminate some of these tax loopholes entirely,” he said. “And it’s true what Treasury Secretary Lew previously said, that we can’t solve the entire problem administratively. But what we are doing is examining are there elements to how existing statutes are interpreted by rule or by regulation or tradition or practice that can at least discourage some of the folks who may be trying to take advantage of this loophole.”

He noted that many Americans are worried about the trend. “And I think it’s something that would really bother the average American, the idea that somebody renounces their citizenship but continues to entirely benefit from operating in the United States of America just to avoid paying a whole bunch of taxes,” said Obama. “We’re reviewing all of our options. As usual, my preference would always be for us to go ahead and get something done in Congress. And keep in mind it’s still a small number of companies that are resorting to this, because I think most American companies are proud to be American, recognize the benefits of being American, and are responsible actors and willing to pay their fair share of taxes to support all the benefits that they receive from being here.

 

“But we don't want to see this trend grow,” he added. “We don't want companies who have up until now been playing by the rules suddenly looking over their shoulder and saying, you know what, some of our competitors are gaming the system and we need to do it, too. That kind of herd mentality I think is something we want to avoid.  So we want to move quickly—as quickly as possible.”

[Jack from Ohio]

No one that is liberal will admit to the fact that "loopholes" = Tax law provisions as passed by Congress. 

 

I doubt if a single liberal would go along with removing all tax deductions and credits from their OWN tax return.  Corporations doing this are only exercising their freedom of choice under out current tax laws.

 

Therefore, if you yell "UNFAIR TAX LOOPHOLE" and you still take deductions and credits on your tax return, you are a mindless, selfish hypocrite!

 

 

My name is Jack from Ohio and I approved this message!!!

[kcjenkins]

SOME COMMENTS IN ACCOUNTING TODAY ON THIS ARTICLE:

 

 

 

Next Obama will be blaming the paper companies for causing the problem. Because the forms with such tax positions are on the paper.

Then, in the near future,Obama will be blaming the unborn children for creating unknown future inequities.

Posted by: Erickrebs | August 7, 2014 2:07 PM

 

 

 

I am just appaled POTUS telling us that we should not follow the law and pay the minimum amount we are allowed to. I think the numbers are totally overblown, this guy does not understand: Business; accounting; taxes; finance, oh I could go on!! Demagoguery, however, he is good at.

Posted by: billcstf04 | August 7, 2014 1:48 PM

 

 

 

I have not yet seen a post considering Mr. Obama's comment about "lost revenue". This is not a new phenomenon, but there are too many Inside the Beltway types that look at the tax receipts as their rightful property, as opposed to the SUPREME COURT DECISION allowing that a taxpayer should only pay the minimum income tax as required by law.

The sense of entitlement makes me weep.

Posted by: GREG H | August 7, 2014 1:05 PM

 

 

 

Hey obama, what's wrong with COMPLYING with the LAW?

Maybe YOU should try COMPLYING with it! Try something different for a CHANGE!

With total disdain and disgust, Bucko Fama

Posted by: djtaz0665 | August 7, 2014 12:39 PM

 

 

 

 

The president is correct in indicating accounting firm recommendations may result in some inversion. However, accountants are in the business of helping clients reduce tax liability.

The accountability for moving forward on "inversion" rests with the company leadership and its values. I am unable to see how that falls on accounting firms.

Now that it is a front and center political hot potato, I think companies will rethink this going forward. Or, expect law changes as Americans react to this high visibility issue.

Posted by: james5290 | August 7, 2014 10:06 AM

 

 

 

I can not believe the President doesn't know how laws are put into place. Congress passed the law, we as CPA's are required to follow the laws and assist our clients with the enacted laws.

If the tax burden wasn't so great in our nation we would not be having this conversation. How about we spend within our means just like all the hard working American's do. Create a balanced budget and stick to it!

Posted by: [email protected] | August 7, 2014 9:55 AM

 

 

 

Interesting take on this. However, even without an inversion, the USA or any other country for that matter reduces the taxes on the companies worldwide income based on taxes paid in other countries. This is especially true when income is earned in countries where the USA has a tax treaty to reduce the impact of double taxation.

In most countries where the inversion strategy is used, they levy no income taxes because they don't have to meet the revenue demands of that country. In some cases these countries have no tax treaties. They also have physical presence in order to meet the demands to mind and management in those countries to make the strategy work. Where there is no treaty and in fact no tax payable HQ location, income generated in other jurisdictions are taxed fully at source.

By the way, the strategy pursued is why Delaware is one of the most attractive states to set up a business in the USA since there are no corporate taxes leveled at the state level. This issue is not as simple as people like to make it out to be.

Posted by: Colin.Daniel | August 7, 2014 9:54 AM

 

 

 

President Obama can blame every one else for what is taking place. But the accountant and lawyers are doing their jobs. The accountant are there to advise management the best way to improve their company's performance. Just as the lawyers are taking advantage of the laws that congress passed. They are not loopholes but the law. ...

Posted by: jacattani | August 7, 2014 9:02 AM

 

 

 

In 2009 as part of the auto industry bailout the Obama administration aided Delphi Auto in avoiding US taxes with inversion tactic

Posted by: kennethhicks | August 7, 2014 8:36 AM

[kcjenkins]

 

 

This whole thing is overblown. Corporate inversions are estimated to reduce revenues by $20 billion over 10 years. The government expects to take in total revenues of $41.231 trillion over the next 10 years. Therefore, corporate inversions are depriving the government of 0.00049% of their revenue over the next 10 years. I know our President doesn't understand numbers very well, but by now he should have figured out that other people do.

Posted by: Unknown | August 7, 2014 8:10 AM