President's Budget Includes Measure To Close Tax Loophole That Favors Foreign-based Insurance Groups
"Even if opponents' claims were true (which they're not), any purported effect on pricing or capacity would arise from an unintended tax subsidy for foreign-based companies at the expense of their U.S. competitors and other U.S. taxpayers," said William R. Berkley, Chairman & CEO of W. R. Berkley Corporation, a member of the Coalition for A Domestic Insurance Industry. "Would Congress ever intentionally pass a tax subsidy only applicable to foreign-based companies? The answer is clearly no. At a time of burgeoning deficits and possible tax increases on U.S. workers and businesses, it's unfathomable that we would continue this unintended loophole allowing foreign-based insurers to avoid U.S. tax on their U.S.-based business."
Both the House Ways and Means Committee and Senate Finance Committee have held full committee or subcommittee hearings on this growing concern in the last few years. Legislation has been filed in both Houses to close this loophole in order to level the playing field between U.S. and foreign-based companies. This proposed legislation has been developed working with the tax experts at both the Treasury Department and the staff of the Joint Committee on Taxation to address concerns that have been raised with prior versions of the bill, including a mechanism for foreign-based insurers to avoid double taxation, and to develop a balanced approach to address this loophole. The proposal is consistent with our trade agreements and our tax treaties and is far from protectionist.
As Congress and the Administration explore options to prevent base erosion aimed at U.S. companies that might seek to strip earnings out of the U.S., it is encouraging that they are also considering proposals that combat base erosion by foreign companies that strip earnings out of the U.S. to their foreign parent offshore. It is time to close this loophole and prevent further erosion of our tax base.
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