Treasury Finalizes Anti-Inversion Rules Tackling “Earnings Stripping”
WASHINGTON, D.C. – The U.S. Department of the Treasury finalized a long-awaited rule Thursday aimed at countering multinational tax avoidance, in a move welcomed by the Financial Accountability and Corporate Transparency Coalition (FACT Coalition). Specifically, the rule attempts to reduce the incentive for companies to invert by addressing an abusive practice known as “earnings stripping” — whereby multinational companies load up their U.S. subsidiaries with foreign debt and charge exorbitant fees and interest on the debt in order to reduce their U.S. taxable income.
Clark Gascoigne, the deputy director of the FACT Coalition, issued the following statement:
“Treasury’s effort to address the problem of ‘earnings stripping’ will move us closer to a fair tax system that addresses the challenges of a global economy. Tax avoidance by multinational companies is estimated to cost the American public up to $134 billion per year. This hundred-billion-dollar subsidy favors the largest, richest corporations in the world at the expense of domestic American businesses and individual taxpayers.
“While we are still poring over the full details of the rule, it’s estimated to close about $600 million in loopholes per year—moving us $600 million in the right direction. However, Congress will ultimately need to act to holistically tackle the problem of inversions and close the outrageous loophole, known as deferral, which currently allows multinational businesses to avoid hundreds of billions of dollars in taxes.”
The FACT Coalition previously filed comments supporting the then-proposed rule with the Treasury Department on July 7, 2016.
Notes to Editors:
- Read an HTML version of this press release on our website.
- Read the Treasury Department’s press release announcing the rule.
- Read Treasury’s fact sheet on the rule.
- Read remarks by Treasury Secretary Jacob J. Lew on a press conference call about the new rule.
- Read the full text of the final rule (PDF).
- Read FACT’s comments on the proposed rules from July 7, 2016.
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