Two federal lawmakers introduced a new anti-inversion bill that would stop companies who have moved their tax domiciles abroad from using a number of tax avoidance strategies, Sen. Charles Schumer’s office announced on Wednesday.
The legislation, introduced by Schumer (D-N.Y.), and Sen. Richard Durbin (D-Ill.) aims at preventing inverted companies from participating in a strategy known as “earnings stripping,” a process that involves inverted companies loading their U.S. subsidiaries with debt. Later, when the American subsidiary pays back the foreign parent company, the interest payments are not subject to U.S. taxes. This allows for companies to realize big tax savings, according to MarketWatch. The corporate tax rate in the U.S. is 35 percent, the highest in the world.
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