After shocking Wall Street in April with proposed rules that ultimately halted the Pfizer-Allergan inversion, the U.S. Treasury released its final rule.
The U.S. Department of Treasury on Thursday finalized a rule aimed at curbing earning stripping, an abusive practice that multinational companies use to avoid taxes. The Main Street Alliance applauds the Treasury Department for taking this critical step.
The rule aims to discourage inversions by making it more difficult for multinational companies to engage in earnings stripping--when companies load their U.S. subsidiaries with foreign debt, and impose artificially high fees and interest on the debt, to reduce their US tax burden. The Treasury’s final rule is expected to raise an additional $7.4 billion in revenue over ten years.
The US Chamber of Commerce and other large business associations strongly opposed this common-sense rule and filed a lawsuit to halt it in August. Meanwhile, the real small business owners on Main Street overwhelmingly support laws that aim to close loopholes taken advantage of by large multinationals. Main Street Alliance submitted comments in support of the rule in June.
“For too long, large corporations have exploited tax gimmicks to dodge their financial responsibility while small businesses are left to pay the tab,” said Michelle Sternthal, Deputy Director of Policy and Federal Affairs for Main Street Alliance. “This behavior, which costs an estimated $134 billion a year, not only erodes the U.S. tax base but undermines businesses who pay their fair share of taxes. Nevertheless, there is a limit to what the Executive branch can accomplish."
To truly address corporate tax loopholes, Congress must act. Main Street Alliance calls on Members of Congress to close these and other tax loopholes that enable companies to shift their profits overseas as a means of corporate tax avoidance.