Obama has his head in the sand over America's corporate exodus

The Telegraph ^ | 7/25/2014 | Jeremy Warner

[markomalley]

When companies are heading for the door as fast as they decently can, you have to ask yourself why? President Obama's approach is a rather different one; let's just lock the door and stop them from leaving.

On both sides of the US political divide, America's apparent corporate exodus via so-called "inversion takeovers" is a source of growing concern. However, their response to the problem could hardly be more different. Broadly, Republicans want to deal with the issue by lowering corporate tax rates; but Democrats want to stop the outflow by changing the rules. As things stand, these allow companies to redomicile to lower tax regimes by increasing their foreign ownership. Takeover a foreign company in a shares transaction, and hey presto, job done. Quite a few of these deals have already been done, and many more are being considered. In any case, what with approaching mid-terms and the administration's faintly protectionist appeal to "economic patriotism", this somewhat arcane tax policy issue has suddenly gone mainstream

“These companies are cherry-picking the rules, and it damages the country’s finances,” Mr. Obama said yesterday. “It adds to the deficit. It sticks you with the tab to make up for what they are stashing offshore. I don’t care if it’s legal — it’s wrong".

Now of course, inversion would not be an issue at all if US corporate tax rates were internationally competitive. They are not. In fact US corporate tax rates are some of the highest in the world. Unsurprisingly, companies have been trying to escape this fiscal prison by redomiciling elsewhere.

[Rennes Templar]

Think he believes what he’s saying?