(MENAFN- AFP) The US Treasury moved Monday to close tax advantages that were encouraging US companies to move offshore, saying the surge in so-called inversions threatened US government income.
Taking aim at a slew of planned multi-billion-dollar "takeovers" of US companies by foreign ones, specifically structured to avoid US taxes by re-domiciling the company abroad, the Treasury said it was moving after Congress failed to act on the issue.
The measures take aim particularly at expectations that a company, after an inversion, would be able to take advantage of earnings held by the US company offshore without ever paying taxes on it.
Under the new rules, companies undertaking inversions will not be able to make use of those funds, often very substantial, without paying taxes on them, according to the Treasury.
"These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether," said Treasury Secretary Jacob Lew.
The Treasury said the new rules are applicable to any deals not yet closed, which could possibly lead to the derailing of some large takeovers.
President Barack Obama, who has condemned inversions as legal but "wrong", applauded the move.
"We've recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I'm glad that Secretary Lew is exploring additional actions to help reverse this trend," he said in a statement.
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