President Obama Just Took a Major Step in Response to the Panama Papers

Rosette Newcomb | April 5, 2016
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President Obama has ordered the U.S. Department of the Treasury to stop corporate tax inversions following the release of the Panama Papers.

Inversion is one of the multiple corporate tax loopholes companies exploit to avoid paying U.S. taxes. Under inversion, an American company acquires a foreign competitor, then re-registers in the home country or territory of that competitor to get around American tax laws. The new rules enacted by the Treasury Department will put a cap on new foreign acquisitions of U.S. assets to skirt ownership requirements for potential inversions in the future.

“When politicians perpetuate a system that favors the wealthy over the middle class, its not surprising that people feel like they cant get ahead,” President Obama said on Tuesday morning. “Rather than doubling down on policies that let a few big corporations and wealthy people make their own rules, we should build an economy that gives everyone a fair shot.”

The Treasury Department’s new rules could completely derail the proposed $150 billion merger between pharmaceutical giants Pfizer and Irish-based Allergan, along with other proposed corporate inversions. The New York Times described the new rules, outlined in a 300-page document, as “thorough and, if not exhaustive, exhausting.” Obama praised the Treasury Department’s latest moves, but called on Congress to pass legislation permanently ending the corporate inversion loophole.

“Only Congress can close it for good,” Obama said.

Obama’s move comes on the heels of the historic Panama Papers leak and the subsequent resignation of Iceland’s prime minister, Sigmundur David Gunnlaugsson, who was found to have used a shell corporation to hide assets overseas.

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