The U.S. should make it harder for companies to reap tax benefits from merging with foreign corporations, former Treasury Secretary Tim Geithner said in a wide-ranging interview on CNBC that aired Monday.
The recent debate over these tax-driven deals kicked into high gear with Pfizer's $106 billion offer to buy its British rival AstraZeneca. If completed, the American drug company could save billions of dollars by relocating to the U.K., where business taxes are lower.
Geithner said in the interview on "Squawk Box" the foreign merger situation showed the need for the Obama administration's 2012 corporate tax reform plan, which failed to win support. "It was to address, partly, this risk [and] to try to create a system where there's better incentives for investment."
Under the plan unveiled in February 2012, the White House proposed eliminating tax loopholes and lowering the corporate tax rate from 35 percent to 28 percent. It had also sought to reduce provisions that allow companies to shift income and investment outside the U.S. while giving tax credits to American companies to bring operations back.
"In the absence of comprehensive reform, you can still do things to make it harder to do these types of transactions," Geithner said in the CNBC interview. "We should be doing that."
One of those measures was tucked into the president's 2015 budget. It would stop so-called inversions—the practice of legally allowing U.S. companies to reincorporate in another country by purchasing a smaller foreign firm.
But with the division in Congress, that's not likely to pass.
The interview was conducted as Geithner's new book "Stress Test" on the 2008 financial crisis was released.