President Obama’s Treasury Department is taking strong action against American corporations that avoid their fair share of taxes. This week, he’s challenged Congress to do the same.
Specifically, the Treasury has targeted the practice of corporate “inversion.” American companies looking to wriggle out of tax obligations can merge with companies overseas, making them nominally foreign operations—while still doing business stateside. This means that while they’re making money in the US, they’re paying taxes in places like Ireland and Canada, where the rates are lower.
By taking advantage of the tax enticements offered by other nations—without actually shifting operations there—companies like Pfizer and Burger King game the system. The Treasury Department announced guidelines to combat this in 2014 and 2015. Now, they’ve issued new temporary regulations to deter the practice.
It’s working. American pharmaceutical company Pfizer has abandoned a $160 billion-dollar merger with the Irish outfit Allergan, citing the Treasury’s new rules. According to Reuters, the drug giant also fears that any attempt to circumvent those rules would only lead to more.
The news adds fuel to the growing movement within the Democratic Party to focus more on matters of economic equality. From healthcare to the minimum wage to tax policy, economic justice has occupied a greater and greater share of the debate.
The crackdown on corporate tax avoidance should come as no surprise; that it comes during the surprisingly strong primary run of Bernie Sanders is no coincidence. The avowed socialist’s campaign has focused almost exclusively on challenging front runner Hillary Clinton’s commitment to leveling the economic playing field.
For his part, Obama is urging Congress to do through legislation what he’s been forced to do through the executive power. Claiming that only Congress has the power to truly “close the loophole for good,” he’s demanding action. While Congress in its current makeup is unlikely to take any, the clamor of more progressive forces in American politics is getting harder and harder to disregard.
Featured image by Kurtis Garbutt via Creative Commons Attribution 2.0 Generic license
