US To Clamp Down On International Tax Loophole

Proposals for wide ranging tax reform in the US, which would prevent businesses moving funds between countries has been dismissed by business this week.

The proposed reforms would stop companies with foreign subsidiaries from moving funds out of the US tax free through provisions of favourable international treaties.

However, business leaders have criticised the measures, claiming that to introduce any more rigorous provisions would be to the detriment of commerce both domestically and on an international level, whilst turning away potential corporate investors from the US.

The House of Representatives has already passed a measure to the Senate, which would tax this kind of movement of funds at 30%, generating substantial revenue for the US coffers as a legitimate anti-avoidance measure if it passes through the Senate.

The proposals will be debated in the Senate next month, where Senators will argue and discuss the merits of such a bill. However, many analysts are predicting that the bill could come under fire in the largely Republican Senate.

The measures have been criticised by business leaders, who have widely argued that should the proposals become law, they would undermine investor confidence in the US economy.

Additionally, rather than being seen as an underhand practice, experts site the movement of funds through other countries as a ‘legitimate practice’, taking advantage of international treaties to which the US has agreed in order to minimise tax liability and gain a competitive edge over other similar scale businesses.

While these companies are not breaking the law, Congress has argued that it would be a good way to clamp down on the apparent loophole, whilst raising more funds for the public treasury.

The bill has passed through Congress and is scheduled for attention in the Senate next month, before it can become law.

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