Obama's Tax Haven Reform Amounts to Chump Change

By Charlie Cray, CorpWatch. Posted June 17, 2009.

“It will take time," Obama told a May press conference, “to undo the damage done by decades of corporate tax avoidance and a system designed to give multinationals an advantage over domestic industries.” When he introduced his deferral tax reform proposals at the May 4 press conference, Obama described them as a “down payment” on a broader reform agenda that will be taken up after his other priorities, especially health care and energy/climate change.

Nevertheless, although Obama has directed his tax policy advisory group (chaired by ex-Federal Reserve Chairman Paul Volcker) to consider any approaches to tax policy—except directly raising taxes on families making under $250,000 a year—there is little talk of reversing the decades-long decline in corporate taxes. Nor are there indications that the administration will go farther than a transaction-by-transaction approach to corporate taxation.

Some interesting proposals for reforming the tax code have recently come from some unlikely places, including Mark W. Everson, one of George W. Bush’s  IRS commissioners (2003 to 2007). In a Washington Post oped in October, he suggested that, rather than embarking on a prolonged battle over arcane regulatory schemes that the public cannot understand, the Obama administration should be pushing for easy-to-understand measures that stand on clear principle, such as a requirement that corporate tax returns be made available to the public.

“Making corporate tax returns public would signal that we are serious about reform and would help rebuild worldwide confidence in American businesses and financial institutions,” Everson wrote. “At a minimum, Congress should not allow businesses to participate in taxpayer-funded bailouts unless we taxpayers can assess who we’re signing up with. After all, Americans routinely provide copies of their federal tax returns to financial institutions before they give us money. Shouldn’t entities looking for taxpayers’ help do the same?”

Another proposal comes from a senior adviser to the Tax Justice Network, a global coalition of NGOs and tax policy experts that focuses on an international approach to offshore tax havens. Richard Murphy, external research fellow at the Tax Research Institute at the University of Nottingham, suggests that the time has come to replace the current approach to multinational corporate taxation with a consolidated international approach. That approach would involve an agreed-upon formula for apportioning the commercial activities to be taxed among different sovereign jurisdictions, much like the territorial system used among the different U.S. states with respect to corporate income taxes.

Although governments are not likely to adopt this idea soon, the increased attention to the question of offshore tax havens at the G-20 and among OECD countries in general suggests that with strong support from NGOs and other members of civil society, a global treaty on consolidated corporate taxation may eventually be possible.

Until bolder measures are introduced and debated, however, what “we can” do at home besides push Congress to close the many tax loopholes designed to exclusively benefit multinational corporations is unclear. In response to questions about the administration’s tax reform plan, Gibbs suggested that Obama will be “happy to have a long discussion about the fairness of tax havens and tax loopholes that let companies avoid paying their taxes.”

Given the current perilous state of the economy and the ongoing exodus of U.S. jobs and tax dollars, the administration will have to do a lot more than that.

See more stories tagged with: economy, obama, taxes, tax, economic crisis, bailout

Charlie Cray is director of the Center for Corporate Policy in Washington, DC.

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »