WASHINGTON: US President Barack Obama has called on Congress to reform the business tax system to close the loophole that allows for a financial practice known as corporate inversions.
"While the treasury department actions will make it more difficult and less lucrative for companies to exploit this particular corporate inversions loophole, only Congress can close it for good," Xinhua quoted Obama as saying at the White House on Tuesday, one day after the department announced a series of steps to curb corporate inversions.
Corporation inversions are transactions in which US-parented multinational companies change their tax residence to a low-tax country by acquiring foreign companies to reduce or avoid paying US taxes, according to the department.
"When companies exploit loopholes like this, it makes it harder to invest in the things that are going to keep America's economy going strong for future generations," Obama said.
These loopholes come at the expense of middle-class families because "that lost revenue has to be made up somewhere", he said.
"Alternatively, it means that we're not investing as much as we should in schools, in making college more affordable, in putting people back to work rebuilding our roads, our bridges, our infrastructure, creating more opportunities for our children," said the president.
Obama urged the Republican-controlled Congress to pass business tax reforms that would make the tax system more competitive for all US businesses.
"I've often said the best way to end this kind of irresponsible behaviour is with tax reform that lowers the corporate tax rate, closes wasteful loopholes, simplifies the tax code for everybody," he said.
"Instead of focusing on soundbites, Washington should do its job and comprehensively reform the tax code," US Chamber of Commerce's executive vice president for government affairs Bruce Josten said on Tuesday.
"The real solution is comprehensive tax reform that lowers rates for all businesses and shifts to a competitive international system that both allows US companies to compete globally and attracts foreign investment to the country," he added.
However, given the heated presidential campaign and wide differences between Republicans and Democrats on tax reform, it's unlikely for Congress to pass any important tax legislation this year.