Tech Giants Resist Obama's Plan to Curb Offshore Tax Avoidance

Strategic Insights -

The Obama administration's proposal to curb offshore tax avoidance through a $15.5 billion plan targets transfer pricing, a technique that allows companies to reduce their tax bills by transferring intangible property to offshore subsidiaries. Tech companies, including Microsoft, Hewlett-Packard, and Dell, are gearing up to fight the plan, which they argue would unfairly punish American firms vis-a-vis their foreign competitors. The proposal is seen as a significant increase in business-tax rates, which is likely to be met with resistance from companies.

Key Takeaways:

  • The Obama administration's proposal aims to curb offshore tax avoidance through a $15.5 billion plan targeting transfer pricing.
  • The Business Software Alliance, a trade group representing tech companies, has stated that the proposal would hurt U.S. companies, jobs, and the economy.
  • The transfer tax on intangibles would unfairly punish American firms vis-a-vis their foreign competitors, according to BSA Chairman Robert Holleyman.
  • The proposal represents less than 4% of the $400 billion in business-tax increases in the budget plan.
  • Corporations engage in transfer pricing when selling goods or services between subsidiaries.
  • Determining the fair market value of intellectual property is challenging, and transfer pricing is considered the "soft underbelly of the income tax."

Statistics:

  • The Obama administration's proposal targets $15.5 billion in offshore tax avoidance.
  • The budget plan includes $400 billion in business-tax increases.
  • The U.S. software industry and many other U.S. businesses would pay a steep price in terms of global competitiveness.
  • The U.S. government estimates $8.5 trillion in deficits over 10 years.

Sources:

  • Euclid Infotech, "Tech Giants Resist Obama's Plan to Curb Offshore Tax Avoidance"
  • Contify.com, "Tech Giants Fight Obama;s Plan to Curb Offshore Tax Avoidance"
  • Internal Revenue Service, "Transfer Pricing"
  • Business Software Alliance, "BSA Chairman on Obama's Budget Plan"
  • General Electric Co., "GE Taxes"
  • Senate Finance Committee, "Max Baucus"