Obama to crack down on US corporates using tax havens

President Obama is set to crack down on wealthy corporations that avoid tax by moving their money out of the US. Speaking in Washington he proposed changes in tax laws that would end much of the transfers and help net about $21 billion each year.
 
The move will be in line with the action against Switzerland and other tax havens by the Group of 20 nations. The move will also target wealthy Americans who mask their money in foreign bank accounts.
 
The president's plans will need the approval of the congress but he said he was determined to push the proposed legislation through to eliminate offshore tax loopholes.
 
However, the president's plans to overhaul the tax laws met with a skeptical response from fellow Democrats on Capitol Hill, indicating several obstacles on the way.
 
Senate finance committee chairman Max Baucus, a Montana Democrat, said the proposals needed further study. Joseph Crowley, another Democrat on the tax-writing House Ways and Means Committee, said he was wary because tax changes would hit Citigroup Inc his New York district's largest employer in the private sector.
 
Natalie Ravitz, a California Democrat, said that any tax overhaul should not end up creating unintended consequences. Support for the proposal came from House Ways and Means Committee Chairman Charles Rangel of New York, while some lawmakers including Iowa Senator Charles Grassley, the ranking Republican on the Senate finance panel, are still undecided.
 
The president has proposed three offshore tax-saving strategies to be outlawed. These are commonly used by companies such as Citigroup, General Electric, and Procter & Gamble.  In doing so, the president has reignited the debate over the competitiveness of US corporates in world markets if they have to pay billions of dollars in taxes on foreign profits.
 
The US administration expects to raise $86.5 billion through 2019 by ending a strategy that allows US- based multinational companies' foreign subsidiaries shift profits into low-tax havens such as the Cayman Islands.
 
The proposal, comes with a $60.1 billion expense deduction limitation plan for American companies that take advantage of laws, allowing them to defer tax on foreign profits through the tax haven route.

Additionally there would be a $43-billion crackdown on abusive foreign tax credits, including those with artificially inflated values. The measures would together contribute to the biggest tax increase on US corporations since 1986.