President Barack Obama will use next week’s G8 meeting to organize a community of governments to minimize companies’ legal use of foreign tax laws, according to an aide.
“The president has been focused on international efforts to reduce what is legal tax avoidance, when companies legally use loopholes that exist in our laws and other [countries’] laws to reduce their tax liability,” said Caroline Atkinson, a former spokeswoman at the International Monetary Fund, who is now his deputy at global economic summits.
“We want to avoid tax competition turning into a lose/lose proposition, where counties not only lose revenue but companies make inefficient decisions by locating where they pay the lower taxes or shifting their profits to the lower taxes rather than where it is most productive for them to invest and produce,” Atkinson told reporters at press briefing on Friday.
Leaders of the world’s biggest economies will meet in Northern Ireland next Monday to Wednesday, allowing Obama to organize their efforts to level tax rules around the world.
By leveling tax rules, governments would restrict companies’ ability to avoid paying high taxes to the governments where the companies’ facilities are based.
The strategy would transfer billions of dollars from shareholders and investors to governments.
The Treasury Department is already trying “to ensure [international] tax evasion is detected and punished,” Atkinson said.
The G8’s goal, according to Atkinson, is “to highlight the need to reduce tax incentives that encourage companies to shift profits around, and instead, replace those incentives with ones that will encourage the creation of jobs and investment at home.”
Numerous countries set low tax rates to invite investment. But such low rates were derided as “loopholes” by Atkinson.
“The loopholes that companies use are the result of rules that countries set,” she complained.
Obama will use the G8 summit to “push the [leveling] process that otherwise might be going more slowly,” she said.
The focus on companies’ tax strategies was boosted last month, when Democrats criticized Apple Computer Co. for cutting its billons of dollars from its tax debt by funneling revenues and sales through subsidiaries in low-tax countries. Still, Apple paid roughly $6 billion in taxes to the U.S. government for its 2012 revenues.
Apple’s practices are routine among high-tech companies, most of whose executives and employees backed Obama during the 2012 election.
During the G8 summit, first lady Michelle Obama will visit the Republic of Ireland, located a short distance south of Loch Erne. Since the 1980s, Ireland’s economy has grown rapidly, partly because the country dropped its corporate taxes well below neighboring countries’ tax rates. Numerous companies, including Apple, cited the country’s low tax rates when they established factories and centers in Ireland.