Trump to order review of Obama tax inversion rules -Mnuchin

Owen Stevens
April 22, 2017

Trump on Friday will order the Treasury Department to review Obama-era rules written to discourage US companies from moving their headquarters overseas to cut their tax bills, Mnuchin says.

Mr. Trump told The Associated Press in the interview that his tax reductions would be "bigger, I believe, than any tax cut ever".

Donald Trump plans to unveil a major tax reform package on Wednesday, aiming to blunt criticism over a lack of legislative achievements and his refusal to release his own tax returns.

Trump also will sign an executive order directing Treasury Secretary Steven T. Mnuchin to review significant changes to the tax code made previous year to determine if they "impose an undue financial burden on American taxpayers", "add undue complexity" or "exceed statutory authority", the White House said.

Mnuchin said he hopes there will be bipartisan support for the plan, but should they fail to reach a consensus with Democrats, the White House will consider using the reconciliation process to finalize tax reform.

Still, the White House is eager to tout progress on the litany of agenda items he promised to fulfill in his first 100 days, despite setbacks including court bans on his proposed immigration limits and a high-profile failure in repealing and replacing the current health care law.

Obama-era regulations on so-called corporate inversions are among the rules the Treasury Department will review and potentially alter, Secretary Steven Mnuchin indicated on Friday.

Trump also signed two presidential memoranda aimed at the Dodd-Frank financial reform law.

Mnuchin and his Treasury staff are already fulfilling a prior request by the president to review regulations and find ways to lessen burdens on businesses.

"In consultation with President Donald J. Trump, the Treasury Department will not be issuing waivers to USA companies, including Exxon, authorizing drilling prohibited by current Russian sanctions", the Treasury secretary said in a statement.

Republicans believe major tax reform would drive annual USA economic growth above 3 percent.

Instead, Obama used regulation to crackdown on inversions after a wave of tax-motivated mergers that occur when a US company is bought by a smaller foreign firm in a low-tax country and moves there to avoid paying higher taxes. He also said there will be an announcement next week regarding plans for tax reform.

Some of those rules, first proposed in April past year, sought to restrict lending among subsidiaries of the same corporate parent, a technique that can create income in low-tax countries and tax-deductible interest payments in the US.

Then, minutes later, at the Treasury Department, during a signing of three executive orders, Trump issued another conflicting statement.

Last year Obama's Treasury Department, concerned about Pfizer's $152 billion bid to acquire the Botox maker Allergan, issued rules to thwart inversions.

Mnuchin would not say what recommendations he expects to make to the president. He said the administration is "very close" to releasing a proposal. What commonly happens in earnings stripping is that corporations make inter-company loans where the debtor is the USA company and the creditor a foreign parent. Critics have said that provision could actually allow banks to take more risks than they ordinarily would, and Trump wants to re-examine whether court-supervised bankruptcy would be a better way to wind down failing banks.

The administration is also trying to pass tax reform that would reduce corporate rates and encourage businesses that have trillions of dollars stowed overseas to bring their profits back to the U.S.

Other reports by VgToday

Discuss This Article

FOLLOW OUR NEWSPAPER