Obama’s plans could hurt US firms operating abroad: Report

Obama has been lashing out at the issue of outsourcing and has said consistently that an Obama administration would close the loopholes in the tax system that helps companies shift jobs overseas.

“Obama’s proposal would change the provision in which US-based companies don’t have to pay taxes on their earnings abroad until that income is “repatriated”, brought back into the United States, like, dividend payments,” report said.

The report argues that while Obama is correct that the US tax policy favours American companies operating overseas where income earned abroad is not subject to immediate taxation as domestic income, it is not clear that the tax code as opposed to other factors such as, lower wages or technological advances, plays a big role in companies’ decisions to move jobs elsewhere.

“This would diminish, to some extent, the competitiveness problems the change would create, so would a reduction in the overall corporate tax rate,” it said.