Obama aims to move fast to curb inversions

President Obama: Want to move quickly on tax inversions
President Obama: Want to move quickly on tax inversions   

President Barack Obama said on Wednesday his administration plans to move quickly to curb what he called a "herd mentality" by companies doing business deals that help them escape U.S. corporate taxes, saying the practice was unfair to Americans.

Obama's comments came the day that U.S. retailer Walgreen backed down from its plan to use a so-called inversion to reduce its taxes. Obama did not single out Walgreen, which is based in his home state of Illinois.

In an inversion, a U.S. corporation avoids U.S. taxes by buying or setting up a foreign company and then moving its tax domicile to that foreign company and its home country.

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"We don't want to see this trend grow," Obama said at a news conference. "That kind of herd mentality is something we want to avoid, so we want to move quickly, as quickly as possible."

President Barack Obama.
Getty Images
President Barack Obama.

Obama made the comments in a wide-ranging news conference at the conclusion of the U.S.-Africa Leaders Summit in Washington, where he hosted dozens of African leaders to discuss trade, business opportunities and security issues.

Obama said the U.S. Congress would need to pass legislation to stop the use of tax inversions entirely, but in the meantime, he plans to look for ways to discourage them.

"It's not fair. It's not right," Obama said. "The lost revenue to Treasury means it has got to be made up somewhere, and that typically is going to be a bunch of hard-working Americans who either pay through higher taxes themselves or through reduced services."

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Inversion transactions have occurred at a record pace this year, but three deals have recently collapsed.

Walgreen had planned to use a takeover of Europe's biggest pharmacy chain, Alliance Boots, to move its domicile overseas, but backed down from that plan.

Obama said: "We can't solve the entire problem administratively, but what we are doing is, are there elements to existing statutes that are interpreted by rule or by regulation or by tradition or practice that can at least discourage some of the folks who may be trying to take advantage of this loophole."

Ukraine

Obama said Ukraine did not need additional military assistance to help fight insurgents in the eastern part of the country but a Russian invasion would raise "a different set of questions."

President Obama: Will continue to defend Ukraine
President Obama: Will continue to defend Ukraine   

Obama's comments came after NATO said on Wednesday Russia had massed some 20,000 troops on Ukraine's border and could use the pretext of a humanitarian mission to invade.

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Asked whether the United States would reconsider sending lethal aid to Ukraine Obama said: "Well keep in mind that the Russian army is a lot bigger than the Ukrainian army. So the issue here is not whether the Ukrainian army has some additional weaponry," noting that the separatists had not been able to match the Ukrainian army's strength so far despite causing a lot of violence.

"Now if you start seeing an invasion by Russia, that's obviously a different set of questions. We're not there yet," he said.

Obama said the United States would continue to work on a day-by-day, week-by-week basis to determine what Ukraine needed to defend itself against separatists who were backed by Moscow.

Meanwhile, U.S. and European sanctions had succeeded in hurting the Russian economy.

"The economy has ground to a halt," Obama said, noting capital flight from Russia.

Israel-Hamas

Obama also expressed support on for Egyptian efforts in Cairo to broker a longer-term Gaza ceasefire between Israel and the Palestinians and said it was important to make sure that the current temporary 72-hour truce holds.

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President Obama: I have no sympathy for Hamas   

He called for developing a "formula" that assures Israel that Gaza will no longer be used for launching cross-border Hamas rocket attacks while also helping to ease hardships of Gaza's population, which suffered heavy civilian casualties during the latest conflict.

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"We will continue to be trying to work as diligently as we can to move the process forward," Obama told a news conference. He also called for a negotiating role for the mainstream Palestinian Authority leadership, which governs in the West Bank while Islamist Hamas controls the Gaza Strip.

—By Reuters