Treasury Secretary Jacob Lew said comprehensive tax reform would be the best way to prevent further corporate inversions, but called on Congress to pass legislation to stem the tide of corporations merging with other companies overseas in order to cut their taxes.
“A corporate inversion is a transaction in which a U.S.-based multinational group restructures so that the U.S. parent of the group is replaced by a foreign corporation, typically located in a low-tax country,” Lew explained in a letter Tuesday to leaders of Congress’s main tax committees, the House Ways and Means Committee and the Senate Finance Committee. “Such transactions allow firms to reduce their level of worldwide taxation, but in the aggregate, they function to hollow out the U.S. corporate income tax base.”
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