Obama to reform overseas tax code
President's plan aims to crack down on tax havens and reduce incentives for companies to create jobs overseas.
WASHINGTON (CNN) -- The White House will unveil reforms to the nation's international tax code on Monday intended to close loopholes for overseas tax havens and end tax incentives for creating jobs overseas.
Senior administration officials briefed reporters Sunday evening in a conference call ahead of the announcement that will be made by President Barack Obama and Treasury Secretary Tim Geithner.
The two components of the president's plan include reforms that ensure the tax code does not handicap companies seeking to create jobs at home, as well as reforms that reduce the amount of tax revenue lost to tax havens.
The White House is targeting companies that use loopholes in the law that allow them to legally avoid paying billions in taxes. It also focuses on wealthy individuals who break the law by creating hidden overseas accounts.
The Obama administration plans to raise $103.1 billion dollars by removing tax advantages for investing overseas and will use that money to help make a tax credit permanent, the officials said. The administration also hopes to raise $95.2 billion dollars over the next 10 years by cracking down on overseas tax havens.
The White House, under the plan, would eliminate the "check-the-box" provision which allows corporations to designate overseas subsidiaries as branches of the company, not subjected to taxes. This tax loophole enables companies to avoid paying U.S. taxes.
One senior administration official said it has cost the U.S. government $86.5 billion over 10 years and is "the most unjustified loophole in the international tax system which needs to close down." It is a legal practice, the officials said, involving "companies taking advantage of a very bad law."
The U.S. government also loses about $9 billion in tax revenue from wealthy individuals who use illegal tax havens overseas, a senior administration official said.
The White House will announce the changes as part of the administration's budget. The plans includes the IRS hiring almost 800 new employees, who would be devoted to cracking down on overseas tax abuse.
The administration expects these initiatives to raise at least $210 billion over the next 10 years "to cut taxes for American families, increase incentives for businesses to create jobs in America, and reduce the deficit."
When asked about the intense lobbying effort already underway against these reforms, including 200 opposition letters sent to Congress, a senior administration official said, "We expect many lobbying against us ... "