The Senate investigations sub-committee is changing its mantra under the leadership of new chairman Rob Portman (R-Ohio).
On Thursday, it held a hearing on the U.S. tax code’s influence on the acquisition of foreign businesses by American companies (inversion), to avoid high corporate rates, and a new trend of foreign companies buying out American firms to make the newly acquired businesses more profitable in lower tax environments.
In recent years, the Senate Permanent Subcommittee on Investigations has probed corporations and financial institutions for violating federal laws that seek to protect consumers, and tax-dodging methods in which American firms merge with foreign companies and move their headquarters offshore.
Chairman Portman now wants the investigations committee to focus on providing “oversight of the federal government, agencies, and departments.”
In Portman’s opening remarks at the hearing, the chairman stated “(The U.S. tax code) negatively impacts our economy today because (it) is not working . . . At a 39 percent combined state and federal rate, the United States has the highest corporate rate in the industrialized world . . . economists tell us, that the burden of corporate taxes falls principally on workers, in the form of lower wages and fewer job opportunities”.
Those who testified on Thursday’s Senate panel included the former CFO of Canada-based pharmaceutical Valeant, which has bought out U.S. firms in recent years, and current CFO of Restaurant Brands International — parent company of Burger King — which moved to Canada in 2014 after merging with Tim Hortons, a Canadian doughnut-coffee chain.
The sub-committee’s review of the Burger King merger found that the $11.4 billion transaction will save the company an estimated $5.5 billion over the next five years.
This month, some House Republicans suggested tying corporate tax reform to a long-term highway funding bill in order to get the White House to sign-off on a package which would lower rates and strike out some exemptions.
“My goal is to use the examples (of corporate off-shore tax incentives) to better understand the need to overhaul our broken tax code”, Sen. Portman concluded in his opening statement.
Later in the year, the investigations committee also plans to investigate alleged abuse of Affordable Care Act subsidies to ensure recipients are qualified, as well as monitor multi-billion dollar government settlements with U.S. financial institutions regarding their sale of faulty mortgage-backed securities.
[Bloomberg] [Photo courtesy Mark Wilson/Getty Images]