Barack Obama: Tax avoidance is a big global problem
US President Barack Obama has warned that "tax avoidance is a big global problem" and urged Congress to take action to eliminate tax loopholes.
"A lot of it is legal, but that's exactly the problem," he said. His comments come a day after the US Treasury Department announced fresh plans to prevent tax avoidance deals known as inversions. Inversions involve a US firm merging with a firm in a country with a lower tax rate and have become more popular. "These companies get all the rewards of being an American company without fulfilling their responsibility to pay their fair share of taxes," said President Obama. The President called inversions an "insidious loophole" and said companies who were doing this were "gaming" the system. The Treasury Department has taken steps to prevent inversions twice before. Its latest move focuses on a practice known as earnings stripping, where a company uses internal loans to move money from the US to its overseas operations. Inversion deals Inversion deals are not new, but have received more public attention in recent years. Shares of Allergan fell 16% after the Treasury announcement, as investors feared the new rules would lead Pfizer to abandon its $160bn inversion deal with the Irish-based firm. Under the terms of the deal Pfizer would buy Allergan - the Dublin- based Botox maker- and move its headquarters to Ireland where the corporate tax rate is 12.5%. The US corporate tax rate is over 30%. In 2014 in another recent inversion deal, Burger King bought Canadian coffee and doughnut chain, Tim Hortons. The merged group moved its headquarters to Ontario, Canada, where the corporate tax rate is 26.5%. Over the weekend a massive data leak at a Panamanian law firm revealed a number of world leaders, and sanctioned corporations using offshore accounts to hid money or avoid taxes.