Washington (June 21, 2002) -- Instead of penalizing companies for trying to minimize their taxes by switching their headquarters to foreign countries, Congress needs to change the tax code itself, says Congressman Dick Armey.
In a letter to lawmakers, Armey criticized recent Democratic proposals calling for legislation to penalize businesses for this practice, called corporate inversion.
Corporate inversion occurs when a U.S.-based, multinational company legally switches places with its foreign subsidiary to take advantage of a low- or zero-tax nation, in effect making the subsidiary the parent company.
“This is akin to punishing a taxpayer for choosing to itemize instead of taking the standard deduction,” Armey wrote. “Companies invert to escape paying taxes on overseas earnings and to become more competitive in the global marketplace,” he added.
Armey said he believes improving the tax code to prevent inversions is a better solution, and said one place to start would be reviewing the complicated foreign business income rules.
-- Tracey Miller-Segarra
