BRIDGETOWN, Barbados, Thursday March 8, 2012 – The prospect of a second term in office for United States president Barack Obama has caused some concern for the future of international financial centres across the Caribbean and further afield.
Irish economics lecturer Steve Kinsella has cautioned that countries like Barbados, which allow multinationals corporations tax savings on their profits will almost certainly be targeted if US President Barack Obama wins re-election in November.
Writing in the “Irish Independent” on March 6, the University of Limerick lecturer said international financial centres like Ireland and Bermuda were being branded as “tax havens” by the cash-strapped US administration.
“We will tremble before the US Internal Revenue Service,” he says. “Noises are being made as part of the US presidential election. The fact that so many US multinationals are availing of tax havens abroad is beginning to dawn on a cash-strapped US administration.
“If re-elected, Obama may close off the dozens of tax loopholes multinationals currently use, cutting Ireland’s recovery off before it starts.”
Last month the Obama administration took aim at so-called corporate tax havens in a proposed overhaul of the US corporate tax system which would lower the tax rate for companies and try to encourage job creation in the United States.
US Treasury Secretary Timothy Geithner expressed disdain for the current business tax system, calling it “uncompetitive, unfair and inefficient” and riddled with special favours.
According to the “Wall Street Journal”, the White House plan would eliminate “dozens” of tax loopholes and use the savings to lower the top income-tax rate for corporations to 28% from 35%.
To stop multinationals from shifting profits to low-tax jurisdictions, the administration would set out the rate for the new minimum tax on foreign earnings.
Upward of US$100 billion in taxes are avoided annually by big corporations by booking their profits outside the US in offshore financial centres.
Corporate tax avoidance became a hot-button issue in the US last year after the Bloomberg financial news service revealed details of Internet giant Google’s use of a network of off-shore financial centres including Bermuda to cut its tax bill by more than $3 billion in three years.
Recently the US Senate Permanent Subcommittee On Investigations issued highly critical report on the subject, citing multinationals’ use of offshore financial centres suche as the British Virgin Islands, the Cayman Islands and Switzerland to reduce — or entirely eliminate — their American tax bills.