(Bloomberg) — U.S. Treasury Secretary Jacob J. Lew said the department is finishing work to limit the benefits companies gain from moving their addresses overseas even if his action won’t be enough to stop the practice known as inversion.
Lew, speaking to reporters Sunday after a meeting of the Group of 20 finance ministers and central bankers in Cairns, Australia, reiterated that while the Obama administration wants to revamp the broader U.S. corporate tax code, “there is one loophole that should be shut down immediately — inversions.”
“With the pace of these deals on the rise and no clear sign of when Congress will have legislation in place, Treasury is completing its work on administrative action to use our existing authority to limit the economic benefits of inversion,” Lew said. “Administrative action cannot shut the door completely, and Congress will still need to act.”
The Organization for Economic Cooperation and Development and G-20 economies are working on plans for a global exchange of information to stop tax-avoidance strategies used by companies such as Google Inc., Apple Inc. and Yahoo! Inc. Multinational companies hold an estimated $2 trillion in low-tax jurisdictions, OECD Secretary General Angel Gurria told reporters yesterday.
In an inversion, U.S. companies reduce taxes by moving their addresses abroad. Businesses including Medtronic Inc. and AbbVie Inc. have sought foreign addresses through mergers, though their executives and operations would change little if at all.
Lew also said it’s up to the G-20 to decide whether Russian President Vladimir Putin can attend a meeting of global leaders in Brisbane in November.
“The question of who attends the summit is really a matter that’s resolved by the group,” Lew said.
As long as Putin’s government threatens Ukraine’s sovereignty “there will be unity to isolate Russia economically,” he said. Talks he held with his counterparts over the weekend “certainly suggest that we remain quite united.”
If the “situation is not better” before the Brisbane summit, “President Putin will hear directly what he’s hearing through economic sanctions and other expressions now, which is that Russia’s actions are unacceptable,” Lew said.
Australian Treasurer Joe Hockey said yesterday that the G-20 economies agree that Putin should be allowed to attend the Brisbane meeting.
“We’ve consulted with a number of the countries and the emphatic view came back that of course we should allow Russia to attend the G-20,” Hockey said.
Finance chiefs and central bankers meeting in Cairns said following their meeting that low interest rates are contributing to a potential build-up of excessive risk in financial markets, even as monetary stimulus is needed to bolster uneven global growth.
Lew said there was an “intensified call” among the group’s members to boost domestic demand in Europe and praised what he said was progress the officials made toward “eliminating the risk that any firm is too big to fail by coming to a broad consensus” on total loss-absorption capacity of large global banks.