Treasury Department of the U.S to Propose Reforms on Tax Regulations

By Amina Faki

The White House ordered Treasury to conduct a sweeping review of all tax regulations written during the Former President Obama’s last calendar year in office.

The executive order directed the agency to find rules that were too costly or complex or that overstepped Treasury’s authority.

The interim results were made public Friday. Treasury identified eight rules that it said met at least one of the first two criteria, with the earnings stripping regulation the most significant on the list. Treasury said it will propose reforms ranging from streamlining to full repeal by Sept. 18.

“It is great to see the Trump administration recognize the detrimental impact that these regulations will have on America’s economic competitiveness,” Nancy McLernon, chief executive of the Organization for International Investment, said in a statement.

The United States is the only developed nation that taxes businesses on income earned around the world which has prompted a growing number of companies to move their headquarters overseas.

In an attempt to turn the tide president Obama passed a raft of sweeping regulations in April 2016, but now the treasury department is rethinking one of the most controversial of those rules.

The rule deals with “earnings stripping” which is when companies load up their US operations with debt, and move profits to foreign subsidiaries.

According to the Treasury Department said it will propose reforms ranging from streamlining to a complete repeal of the rule by September 18.

“If the regulations are left on the books and enter into full effect, they will increase the complexity of doing business in the United States,” trade groups including Business Roundtable said in a letter this spring. “We believe they will frustrate this administration’s goals of improving the US business climate, enhancing America’s global competitiveness, and driving economic growth and job creation — for all multinational businesses operating in the United States.”

The rule requires companies to provide additional documentation when lending money from foreign operations to those based in the United States. Under Obama, Treasury argued that the transactions amounted to transfer of equity — not debt — and therefore were not subject to preferential tax treatment. Business groups said the agency was not authorized to make that distinction.

Treasury Department is set to review about these tax regulations