Under provisions of the plan, companies would no longer be able to write off domestic expenses for generating profits abroad, a loophole that Obama says encourages U.S. companies to move jobs overseas. The plan would drastically reduce incentives for U.S. companies to base all or part of their operations in other countries.

Additionally, Obama is pushing for a $60.1 billion plan to restrict deductions for American companies that defer taxes on foreign profits and a $43 billion crackdown on abusive foreign tax credits. Combined, these measures would amount to the biggest tax increase on U.S. corporations since 1986, according to Bloomberg News.

Companies with significant overseas operations could lose billions if the president’s plan passes. Under existing laws, companies are taxed only on profits they bring home.  By stashing the profits in international subsidiaries they can defer paying taxes indefinitely.

While it debates the bill, Congress will remain under pressure from a significant lobbying campaign to scuttle significant portions of Obama’s plan.

Over 200 firms, including Pfizer Inc. (NYSE: PFE), Oracle Corp. (NASDAQ: ORCL), Microsoft Corp. (NASDAQ: MSFT), Johnson & Johnson (NYSE: JNJ) and General Electric Co. (NYSE: GE) signed a letter to congressional leaders in March opposing changes to the “deferral” provision.

The letter, also signed by the U.S. Chamber of Commerce, said the firms would not be on a level playing field with international rivals, many of which are not required to pay taxes at home on overseas units.

“This is bad stuff,” Kenneth Kies, a tax lobbyist at the Washington firm Federal Policy Group, told Bloomberg. “This is going to be the biggest fight for the corporate community in the next two years.”

The biggest squabble is likely to be over the repeal of so-called “check-the-box” rules, which took effect in 1997. They were designed to reduce paperwork by allowing companies to classify units within their corporate umbrella in the most tax-efficient manner without generating a tax challenge from the IRS.

The rules make it easy for multinationals to shift profits to entities in low-tax countries.   Once the assets are transferred, the parent company borrows from the subsidiary, making the interest payments deductible in the U.S. and tax-free in the haven. More than 80% of the nation’s 100 biggest companies have subsidiaries in tax havens, according to a Government Accountability Office report.

The rules were intended to help U.S. companies minimize their foreign tax liability, not to dodge the Internal Revenue Service (IRS), according to Drew Lyon, a former Treasury Department tax official who is now a principal at PricewaterhouseCoopers LLP’s Washington office.

The changes to the “deferral” provision would hit some of the nation’s biggest companies hard since half of multinationals firms’ income is earned abroad, Lyon told Reuters.

Another part of the package would shift the burden of proof to individuals when the IRS alleges assets are being hidden in bank accounts in offshore tax havens like the Cayman Islands and Switzerland.

The U.S. government has essentially declared war on U.S. citizens who make use of offshore accounts to stash money in overseas accounts and avoid taxation.

Swiss banking giant UBS AG (NYSE: UBS) agreed in February to pay a $780 million fine and identified about 320 of its American clients as it acknowledged that it helped U.S. customers hide assets from their government.

The U.S. is now suing UBS in a civil case to force it to divulge the identities of 52,000 Americans with accounts at the bank that it suspects are hiding about $14.8 billion in assets.

Obama also announced plans to hire nearly 800 new IRS agents to bolster enforcement of overseas tax evasion and wants to see stiffer penalties for those who fail to meet reporting requirements.

Source: Obama Wants New Law to Tax Overseas Profits and Nail Tax Dodgers

• Heavy equipment maker Caterpillar Inc. (CAT) said it will offer voluntary early retirement packages to about 2,000 workers. Age and length of tenure will determine who gets the offer. “Our intent is to provide eligible employees the opportunity to retire early as we expect significant declines in all geographic regions,” Sid Banwart, vice president of human services, said in a release.

• Canada recorded its first monthly trade deficit in December, its first in more than 30 years. The C$458 million deficit ($366 million) stems from “collapsing commodity prices and the deep dive in U.S. spending, especially on autos,” Doug Porter, deputy chief economist at BMO Capital Markets in Toronto, told Bloomberg. The country is the No. 1 exporter of oil and natural gas to the U.S., and overall exports fell 9.7% in December.

• Research in Motion Ltd. (RIMM) said its quarterly earnings would meet the low end of expectations. “You probably see big financial institutions cutting costs … and the consumer is just not getting a new handset,” James Cordwell, an analyst with Atlantic Equities in London, told Reuters. “It just shows they’re not immune to the economic slowdown like anybody else.”

• General Electric Co. (GE) said it signed a $1 billion contract to build 30 gas turbines in Saudi Arabia. Demand for power is growing in the Middle East, and GE said it has sold 188 gas turbines in 2008 and may sell about 185 in 2009, Bloomberg reported.

• Investors flocked to the U.S dollar yesterday, as it rose against the yen and euro in volatile trading. The dollar was bolstered by a flight to safety surrounding uncertainty about the final size and scope of the U.S. stimulus package. The general consensus was that the U.S. bank bailout plan unveiled on Tuesday covered the key areas needed to stem the hemorrhaging in the banking sector, Reuters reported.  In late afternoon trading, the dollar was up 0.3% against the yen at 90.53 yen. The euro was down 0.4% at $1.2848.

• General Motors Corp. (GM) is asking Sweden to guarantee $600 million in European Investment Bank loans to keep the Saab Automobile unit operating until it can be restructured for sale, Bloomberg reported, citing an anonymous source. The money, along with about $400 million (3.36 billion kronor) from GM, would allow Saab to introduce new models that would keep Saab competitive, and possibly prevent it from being put into administration or closed down. GM is trying to figure out what to do with Saab by Feb. 17, the due date for a progress report to the U.S. Treasury on how it will become viable so it can repay $13.4 billion in government loans by 2011.

• Gold soared to a 7-month high on Wednesday as investors bought gold and bullion-backed exchange-traded funds.  U.S. gold futures pushed through resistance levels just above $930 and rose $30.80 to $944.50 an ounce for April delivery on the COMEX division of the New York Mercantile Exchange. Most analysts are projecting gold to rise above $1,000 this year, as safe-haven buying and demand for gold as a hedge against inflation are expected to continue, MarketWatchreported.

• China will make its biggest ever investment in a foreign company by injecting  $19.5 billion in cash into mining group Rio Tinto Group (ADR: RTP), the Financial Times reported.  Chinalco, a state-owned aluminum producer will increase its stake in Rio Tinto to 18%, grabbing a minority share in some of its best mining assets and an issue of convertible bonds.  The deal will come under intense scrutiny from Australian politicians, who had imposed a 15% limit on Chinalco’s holdings.

Source:  Global Investment News Briefs Thursday, February 12th, 2009

• U.S. sales in November fell 31% for Ford Motor Co. (F) and 34% for Toyota Motor Corp. (ADR:TM) Every line of Ford vehicle posted falling sales, and the company responded by slashing first-quarter North American output for 38% to 430,000 vehicles, Bloomberg reported.

• Crippled by global slowdown, British Airways plc (OTC:BAIRY) said it is in merger talks with Australian airliner Qantas Airways and Spain’s Iberia, Reuters reported. Should the three mesh together, it would create the largest airline company.

• U.S. conglomerate General Electric Co. (GE) said it is looking for ways to cut costs, including job cuts and its finance and industrial units, in order to reach the low end of its fourth-quarter profit forecast. “Obviously the macro environment remains very challenging,” Keith Sherin, GE’s chief financial officer, said in a briefing with investors, Reuter reported. “We know that we have to reduce our cost structure in this environment.”

• In the midst of a dour holiday shopping season, Sears Holdings Corp. (SHLD) posted a wider-than-expected third-quarter loss, as its Sears and K-Mart stores took a beating from the U.S. recession. The company also announced it would close more stores and buy back as much as $500 million of its stock, MarketWatch reported.

• Oil prices fell to a 3-year low yesterday (Tuesday) as mounting job losses and fears of a protracted recession continued to weigh on investor confidence. Light, sweet crude for January delivery fell $2.32 – more than 4% – to settle at $46.96 a barrel on the New York Mercantile Exchange. Prices touched $46.82 earlier in the day, the lowest level since 2005.

• U.S. credit card write-offs will continue to increase in 2009, as the unemployment rate continues to climb from the 6.5% reached in October, the top executive at Discover Financial Services (DFS), said yesterday (Tuesday) according to The Associated Press. David Nelms, Discover’s chief executive, said write-offs could be near 5% in the fourth quarter and 6% in the first quarter of 2009.

Source: Global Investing Roundups Wednesday, December 3rd, 2008

• Myron Ullman, the chief executive officer of department store company J.C. Penney Co. Inc. (JCP), said that he doesn’t intend to provide annual financial guidance at this time, as the market is too cloudy to predict a forecast, Reuters reported. “I’ve been in the business 39 years. I don’t think I’ve ever seen an environment that was as unpredictable as the current environment,” he said.

• Wells Fargo & Co. (WFC) emerged from the first quarter with analyst-beating results, posting an 11% decline in profits but a 12% increase in revenue and 1% decline in expenses. “Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter,” Chief Executive John Stumpf said in a statement.

• China’s economy grew by 10.6% in the first quarter of 2008, only slightly less than the 11.2% expansion in the final three months of 2007. The country was able to maintain double-digit growth despite complications stemming from the U.S. credit crunch, the Chinese New Year and the worst ice storm the country had seen in decades.

• General Electric Co. (GE) plans to invest up to $2 billion in acquisitions and other deals in China over the next three years as part of a strategy to double its revenues in the country, the Financial Times reported. The world’s biggest industrial company, which stunned investors last week when it announced its worst quarter in five years, is looking to hire a team of 20 “in-house investment bankers” to conduct the deals in China.

• Toyota Kirloskar Motor Private Ltd., the automotive joint venture between Japan’s Toyota Motor Corp. (TM) and India’s Kirloskar Group is set to invest $350 million on a new plant in Bangalore. The plant will follow Tata Motor Corp’s (TTM) lead by producing “a strategic new small car” by 2010, IBTimes India reported.

• Qualcomm Inc. (QCOM) announced it would invest in India-based start-up technology companies that offer “innovative technologies and services that enhance wireless communications and semiconductor ecosystems,” The Financial Express reported. San Diego-based Qualcomm’s first investment will be in India’s Tessolve Services Pvt. Ltd., a firm that provides solutions and platforms for semiconductor testing, packaging, qualification and failure analysis.

• The U.S. Department of Justice has approved the $810 million deal that allows Russia’s largest steel producer Severstal OAO to purchase the Sparrows Point steel mill from ArcelorMittal (MT). The DOJ demanded the sale of the Baltimore County, Md.-based plant after the merger between India-based Mittal and Luxemburg-based Arcelor to enforce anti-monopoly laws.

• General Electric Co. (GE) former chief executive Jack Welch demonstrated his frustration yesterday (Wednesday) with his successor, Jeffrey Immelt, after GE’s profit fell 6% in the first quarter. “I’d be shocked beyond belief and I’d get a gun out and shoot him if he doesn’t make what he promised now,” Welch said in a CNBC interview, a cable station owned by GE, The Associated Press reported. “Just deliver the earnings. Tell them you’re going to grow 12% and deliver 12%.”