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President Obama Sets Out Plan to Tax US Companies on $2Trillion Profits Held Abroad

Business  (tags: Obama, budget proposals, bring profits home, tax plan, Top 10 US overseas cash piles, US multinationals, huge stockpiles, overseas cash, tax-dodging, tax, avoidance, inversion, offshore profits, earnings held abroad )

- 1477 days ago -
Apple-Microsoft-Pfizer-GE'd face bills of >$10bn under presidentâEUR(TM)s proposal for 1-off levy, raising >$238bn, plus $600bn over next 10 yrs from 19% annual tax on offshore profits. Stock of earnings held abroad by US firms has increased 6fold since 2002


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LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 3:39 am
Monday 2 February 2015 - Barack Obama sets out plan to tax US companies on $2tn profits held abroad - excerpt:

"Barack Obama’s plan to force US multinationals to pay tax on the more than $2tn (£1.3tn) of profits they hold offshore could boost US GDP by 1.5%, with major corporate names such as Apple and Microsoft facing bills of $10bn each.

In his budget presented on Monday, the president set out proposals to make companies pay a 14% one-off levy on their cash held offshore followed by a 19% tax on future profits earnings.

Andrew Hunter, economist at consultancy Capital Economics, said the one-off tax could raise at least $238bn and would increase US GDP by about 1.5% if it was used to fund new infrastructure. He said the stock of earnings held abroad by US firms has increased sixfold since 2002 to $2.1tn, led by companies in the technology and pharmaceutical sectors.

“The biggest holders of foreign cash within these sectors, such as Pfizer, Apple and Microsoft, would face payments of around $10bn each,” said Hunter, adding that the permanent tax on future foreign profits could raise up to $600bn over the next 10 years.

Top 10 US overseas cash piles

Company ...................... Cash pile

General Electric............. $110bn

Microsoft ..........................$76.4bn

Pfizer ...............................$69bn

Merck ..............................$57.1bn

Apple ............................. $54.4bn

IBM ................................ $52.3bn

Johnson & Johnson ....... $50.9bn

Cisco .............................. $48bn

Exxon Mobil ................... $47bn

Citigroup .........................$43.8bn

NOTE: Figures are from 2013, the latest available. Overseas cash has changed significantly for some.
SOURCE: Capital Economics

In recent years, US multinationals, including Apple and General Electric, have built up huge stockpiles of cash overseas while Democrats and Republicans fight over ways to solve the problem.

The Democrats want multinational companies to pay 35% tax – the current US corporation tax rate – on overseas profits. Republicans have been fighting against taxing the profits, but Republican senator Rand Paul supports a 6.5% tax, suggesting room for a compromise.

A White House official said: “This transition tax would mean that companies have to pay US tax right now on the $2tn they already have overseas, rather than being able to delay paying any US tax indefinitely.”


CNN / MONEY - "Offshore corporate cash piles at risk from Obama tax plan" article + informative video "How some companies dodge taxes" (aka 'inversion')

Irish Independent, 20 Aug 2014 - "US authorities have grappled for more than 30 years with corporate deals known as inversions by which American companies shift their tax domiciles abroad to avoid US taxes. (See interesting super-sized diagram)

"Fifty-two substantial deals like this have occurred since 1983, about half of them since the 2008-2009 credit crisis.

Throughout that time the US government has tried various methods to manage the exodus, with mixed succcess.

The first inversion in 1983 by Mcdermott International was followed a year later by two new rules from the US Internal Revenue Service. No more big inversions followed for more than a decade.

In the mid-1990s, the deals resumed, typically with US corporations setting up smaller companies in Bermuda or the Cayman Islands. Many energy and insurance companies did this.

In these inversions, the new island tax haven company would become the parent of the US business, though core operations stayed in the United States. The name "inversion" came from the idea of turning the company upside down, making the offshore company the head and US operations the body.

US companies were able to book foreign profits at low or no taxes abroad, putting them out of the reach of the US Internal Revenue Service.

The strategy made other legal tax-avoidance moves easier, such as US earnings stripping. That involves a foreign parent lending to a US unit, which deducts interest payments to make its US income smaller for tax purposes, while the foreign parent books interest income at its home country's lower tax rate.

The US Treasury Department expressed concern about the deals in 2002. Congress in 2004 adopted Section 7874 of the tax code. It set two tests of whether an inverted company would be treated as foreign or domestic by the US government.

First, if the original US company's investors still held 80pc or more of the new foreign parent's shares, the new parent would be treated as US, not foreign.

Second, the same treatment would apply if the new company had no "substantial business activities" in its home country.

After these rules were adopted, the deals dried up again. Until recently.

Since 2008, there has been a wave of deals. In these deals the new foreign parent tends to be in Canada, Ireland, Britain and the Netherlands.

They are structured to take advantage of a part of the law that said if the original US shareholders own 60pc to 80pc of the new, foreign parent, it can be treated as a foreign entity, but with some restrictions.

Over the past four years, US President Barack Obama has consistently called for tighter rules that would again restrict the shifting of US companies off shore.

While several bills have been filed by Democratic politicians, Congress has taken no major action on inversions in many years. "

LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 4:14 am

TAX JUSTICE Blog, January 27, 2015 - Congress Should Pass the Stop Tax Haven Abuse Act to Combat International Tax Avoidance - EXCERPT:
"What can be done to combat this flagrant abuse of our tax system? One new approach would be the passage of Sen. Sheldon Whitehouse (D-RI) and Rep. Lloyd Doggett's (D-TX) Stop Tax Haven Abuse Act, recently reintroduced legislation that would significantly curb rampant tax avoidance by many multinational corporations. Tightening offshore tax rules and enforcement as the act proposes could generate an estimated $278 billion over the next decade in much-needed revenue.

While the Stop Haven Abuse Act would significantly improve our international tax system, it does not go quite as far as proposals that would "end deferral" of taxes on foreign profits, which would end international income shifting by corporations full stop by ensuring that U.S. companies pay the same tax rate at the same time on their foreign and domestic profits.

In previous Congresses, the Stop Haven Abuse Act has been very closely associated with tax fairness champion Sen. Carl Levin, who retired at the end of the last Congress. While the new legislation is largely the same as the previous bill of the same name, the latest version includes significant new provisions to curb corporate inversions (which have also been proposed separately as part of the Stop Corporation Inversions Act) and earnings stripping.

The key provisions of the Stop Tax Haven Abuse Act include: .../..." (SEE on site)

January 13, 2015 - The FACT (Financial Accountability and Corporate Transparency) Coalition Lauds Introduction of 'Stop Tax Haven Abuse Act' - Bill Would Prevent Corporations and Wealthy Individuals From Using Tax Havens to Avoid Taxes

MoveON PETITION - Support the "Stop Tax Haven Abuse Act" OUTRAGE! FEWER than 2,000 signatures -- ONLY 1,554 signatures !!!!

The Campaign for America's Future PETITION - Congress: Pass the Stop Tax Haven Abuse Act. Make big corporations pay their taxes like everyone else - 83722 signatures /10306 needed

Rolling Stone, August 27, 2014 - "The Biggest Tax Scam Ever" - "Some of America's top corporations are parking profits overseas and ducking hundreds of billions in taxes. And how's Congress responding? It's REWARDING THEM for ripping us off"

LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 4:30 am
Recent MOVE ON Petition: "Congress: Put America back to work restoring our vital infrastructures" - "Pass the Stop Tax Havens Abuse Act and use the $220 billion in recovered corporate taxes to repair and restore our deteriorating railroads, bridges, roads, public transit, sanitation systems, harbors and schools. The benefits include putting people back to work, shrinking inequality, reducing the national debt, and energizing U.S. competitiveness for generations to come."

To be delivered to The United States House of Representatives, The United States Senate, and President Barack Obama

(Petitions referring to "Carl Levin's Stop Tax Haven Abuse Act" are old & refer to Levin's introduction of this bill in 2011. We need to find petitions that no longer refer to Carl Levin, but Sen. Sheldon Whitehouse (D-RI) and Rep. Lloyd Doggett's (D-TX) "Stop Tax Haven Abuse Act," basically the same as Carl Levin's but with improvements/additions, and reintroduced in Jan 2015.)

Animae C (507)
Tuesday February 3, 2015, 4:35 am
Gee your President is awesome!

Petition prev. signed

T.Y. LucyK


LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 4:52 am

"Stand with the FACT Coalition" [FACT = Financial Accountability and Corporate Transparency] - We, the undersigned, join with the FACT Coalition in calling for an honest and fair corporate tax code, greater transparency in corporate ownership and operations, and commonsense policies to combat the facilitation of money laundering and other criminal activity by the legitimate financial system.

Monday, February 2, 2015 - "Tax Fairness Coalition Says Obama’s Plan to Address Corporate Tax Avoidance on Offshore Profits is ‘Not Nearly Enough’ " - "$238 Billion for Infrastructure Should be Considered a Down Payment; Corporations Need to do Much More to Pay Their Fair Share"

Ben O (135)
Tuesday February 3, 2015, 5:42 am

LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 8:07 am

December 11, 2014 - New Trove of Leaked Luxembourg Documents Point to Disney, Koch Industries Tax Schemes :
"A month after the International Consortium of Investigative Journalists (ICIJ) revealed leaked documents demonstrating that Luxembourg allowed Pepsi, IKEA, FedEx and 340 other corporations to use the country as a tax haven, ICIJ has now announced new evidence that Disney, Koch Industries and 33 additional companies are also in the game.

The new trove of leaked documents shows that Disney and Koch Industries have, like the other companies, obtained private tax rulings from Luxembourg’s Ministry of Finance that bless complex business and accounting structures shifting profits from countries where actual business is done into Luxembourg, and then in some cases into other countries.

.../... "

From the website of The International Consortium of Investigative Journalists (ICIJ) - Luxembourg Leaks: Global Companies' Secrets Exposed - "Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg" :
"Pepsi, IKEA, FedEx and 340 other international companies have secured secret deals from Luxembourg, allowing many of them to slash their global tax bills while maintaining little presence in the tiny European duchy, leaked documents show.

These companies appear to have channeled HUNDREDS OF BILLIONS of dollars through Luxembourg and saved billions of dollars in taxes, according to a review of nearly 28,000 pages of CONFIDENTIAL documents conducted by the International Consortium of Investigative Journalists and a team of more than 80 journalists from 26 countries.

Big companies can book big tax savings by creating complicated accounting and legal structures that MOVE PROFITS to low-tax Luxembourg from higher-tax countries where they’re headquartered or do lots of business. In some instances, the leaked records indicate, companies have enjoyed effective TAX RATES of LESS THAN 1 PERCENT on the PROFITS they’ve shuffled into Luxembourg.


The records show, for example, that Memphis-based FedEx Corp. set up two Luxembourg affiliates to SHUFFLE earnings from its Mexican, French and Brazilian operations to FedEx affiliates in Hong Kong. Profits moved from Mexico to Luxembourg largely as tax-free dividends. Luxembourg agreed to tax only ONE QUARTER of 1 percent of FedEx’s non-dividend income flowing through this arrangement – leaving the remaining 99.75 percent TAX-FREE.

“A Luxembourg structure is a way of STRIPPING INCOME from whatever country it comes from,’’ said Stephen E. Shay, a professor of international taxation at Harvard Law School and a former tax official in the U.S. Treasury Department. The Grand Duchy, he said, “combines enormous flexibility to set up tax reduction schemes, along with binding tax rulings that are unique. It’s like a magical fairyland.” .../..."

Home Page - "Luxembourg Leaks: Global Companies' Secrets Exposed"

LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 8:30 am
One link from above comment didn't come out:

From the website of The International Consortium of Investigative Journalists (ICIJ) - Luxembourg Leaks: Global Companies' Secrets Exposed - "Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg"

Past Member (0)
Tuesday February 3, 2015, 8:39 am
Sweet news--you go Obama! And signed-thx Lucy

SusanAWAY Allen (219)
Tuesday February 3, 2015, 1:08 pm
Noted and shared this article widely, as well as the other two or three articles in your message. Also signed and shared both of the petitions.

Our president is awesome, however, our entire congress sucks and they will fight this every single step of the way. The teanuts are already screaming about it. This has little chance of coming to fruition, but we can always hope.

Thanks Lucy.

LucyKaleido ScopeEyes (82)
Tuesday February 3, 2015, 1:42 pm
The figure for Apple in the above list "Top 10 US overseas cash piles" (in my 1st comment) needs to be revised. According to the Guardian, 2 February 2015 :

"Apple last week reported that its cash mountain had grown to $178bn."

"Apple last week reported that its cash mountain had grown to $178bn (£118bn) – among the biggest of any public corporation in the world. The lion’s share is surplus profits from outside America, in large part thanks to the huge popularity of its phones, laptops and other products around the globe, but also in no small measure because of its aggressive Irish tax structure.

As at the end of September last year, cash held offshore and beyond the grasp of the US taxman stood at $137bn and is likely to have grown since. At present, this sum cannot be reinvested in Apple’s US businesses nor returned to shareholders without incurring a colossal tax bill. In effect, it is in limbo.

The cash pile is technically owned by Apple’s subsidiaries in Knocknaheeny, a rundown northern suburb of Cork, Ireland. But it is managed by a rarely talked-of investment subsidiary closer to home and largely invested in American assets, including billions in corporate bonds and US government debt.

There is only one brief mention of this opaque internal investment company in Apple’s annual report, on page 114. It is called Braeburn Capital and registered in a quiet corner of Reno, Nevada. Some commentators have described it as “the biggest hedge fund you’ve never heard of”. (click link online)

It is this kind of operation – common to many US multinationals, particularly in the tech and pharmaceuticals industries – that Obama is looking to deflate, freeing up America’s largest companies to repatriate cash held in limbo, but without releasing them entirely from US tax liabilities they have been avoiding for years, often very 'creatively.'


Nancy M (147)
Tuesday February 3, 2015, 2:08 pm
if they closed the loopholes, they might not have to raise taxes.

But this is on the right track. YAY for Obama.

Leanne B (46)
Tuesday February 3, 2015, 2:33 pm
Sounds long over due. Government has sided with greed (Corporation and uber rich) over citizen's far too long. Three cheer's for Obama!

Sheryl G (359)
Tuesday February 3, 2015, 3:44 pm
I'd like to say hooray.....but as Susan mentions it will never get through the House or Congress. Why did he wait until both Houses were controlled by Republicans. This should of been done when both Houses were controlled by the Democrats when he first got in.....

I know the article said he tried in 2013 when at least the Senate was controlled by the Democrats but not the House of Reps. It sounds good, but other than setting fire for a conversation of the Republicans yelling for the salvation of the poor poor rich I don't see this happening any time soon.....not with who we have in our govt at this time.

LucyKaleido ScopeEyes (82)
Wednesday February 4, 2015, 2:24 am
"Why did he wait until both Houses were controlled by Republicans"???

Hate to say it, but maybe so as not to upset his corporate 'friends'... after all, the Democrats are only marginally less 'on the take' from corporations & banks than the Rethugs, if at all. They just don't indulge in the same grotesque, repulsive & ugly public statements.

With no possibility of it getting passed, it becomes pure window dressing, to paint him as a modern day Robin Hood & gain the esteem of the 99%.

Maybe he wouldn't have been able to get it passed, even when both Houses were controlled by Democrats.

We'd need to see what the political analysts are saying, Sheryl.

LucyKaleido ScopeEyes (82)
Wednesday February 4, 2015, 3:14 am
I get contradictory info on Michigan Democrat Senator Carl Levin's "Stop Tax Haven Abuse Act":
Yesterday, I found petitions & articles referring to it as a 2011 bill; today I find it was 2013!:

CS. 1533 (113th Congress): "Stop Tax Haven Abuse Act" (

"This bill was introduced on September 19, 2013, in a previous session of Congress, but was not enacted.
Introduced: Sep 19, 2013 in the 113th Congress, 2013–2015
Status: DIED in a previous Congress"

I think that by 2013, the Dems had already lost the House, no?

In fact, NO CONTRADICTION: It was ALSO introduced in the 112th Congress - "The 112th Congress is the FIFTH Congress in which Levin has introduced a comprehensive bill to combat offshore and tax shelter abuses." (July 12, 2011 - "Levin Unveils Stop Tax Haven Abuse Act" - - the important provisions explained, for those you'd like a look)
"A number of provisions from past bills have made it into law, such as measures to curb abusive foreign trusts, close offshore dividend tax loopholes, and strengthen penalties on tax shelter promoters. Levin’s efforts also helped spur ENACTMENT of the Baucus-Rangel Foreign Account Tax Compliance Act (FATCA) to increase detection of hidden offshore accounts. President Obama, when he was a member of the Senate, cosponsored Levin offshore tax bills in 2005 and 2007. Rep. Lloyd Doggett (D-Texas), joined by multiple cosponsors, has introduced House companion bills in the past and will do so again."

I HAVE TO LAUGH- My bank here in France made me fill out a FATCA form this past summer, in order to comply with the new US legislation. But this is a total WASTE OF TIME & BUREAUCRACY, because it is needless REPETITION: the US govt has ALWAYS known about my miserable checking & savings accounts here --in a foreign country-- & that they are aboveboard. EVERY single year when I file my US INCOME TAX RETURN, an accompanying form has ALWAYS required that I declare IN FULL every BANK ACCOUNT I have in France, with the HIGHEST AMOUNTS of money on EACH during that tax year. So, for people not hiding anything, the US INCOME TAX RETURN has always required FULL DISCLOSURE of FOREIGN bank accounts & money in them!


Arielle S (313)
Wednesday February 4, 2015, 6:28 am
Good, good, good

JL A (281)
Wednesday February 4, 2015, 11:47 am
an idea whose time has come--now let us see how long it will take our Congress to represent us on this one. Thanks Lucy

Freya H (345)
Wednesday February 4, 2015, 3:11 pm
Way, way overdue! I just hope he can pull it off with a Republican-dominated Congress.

Evelyn B (63)
Friday February 6, 2015, 9:34 pm
The decision-makers are mainly those, or linked to those, with most to lose by such a big shift! But one keeps hoping ...
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