Obama has announced moves against offshore tax haven abuse by big corporations and wealthy individuals.

On the premise of ending tax breaks for companies that re-locate overseas, and therefore lose American jobs, the administration is introducing a set of measures designed to keep US companies firmly grounded to their US tax base.

The changes are aimed to pull in a total $210bn over the next 10 years, which may be used to help fund middle-income tax cuts and a permanent tax credit for corporate research and development.

The big change Obama will introduce is concerning laws which currently let companies park foreign-earned profits abroad, and defer tax until these funds are repatriated. The system, known as “deferral”, lends a lifeline to many large companies. As a result Obama is likely to face extreme resistance from corporate lobbyists and executives if he wants to pass this legislation, despite widespread popular support for the measures which are seen as taxing the “fatcats” who started the financial crisis.

BUt Obama argues that the current system penalises US companies that stay in America.

“It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York,” the president said.

He says he is attempting to “level the playing field” with these measures, arguing that in reality many use the laws to kite money into offshore tax havens like the Cayman Islands, Bermuda and the British Virgin Islands.

This is unlikely to persuade company directors and executives however, who see the moves as yet further intrusive attempts at tax collection in difficult times.

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