U.S. President Barack Obama’s fiscal 2016 budget will seek new taxes on trillions of dollars in profits accumulated overseas by U.S. companies, and a new approach to taxing foreign profits in the future, but Republicans were skeptical of the plan late Sunday.

    Reviving a long-running debate about corporate tax avoidance, Obama will target a loophole that lets companies pay no tax on earnings held abroad, the White House said. But his proposal was certain to encounter stiff resistance from Republicans.

    In his budget plan unveiled yesterday, Obama called for a one-time, 14 percent tax on an estimated US$2.1 trillion in profits piled up abroad over the years by multinationals such as General Electric, Microsoft, Pfizer Inc. and Apple Inc.

    He will also seek to impose a 19 percent tax on U.S. companies’ future foreign earnings, the White House said.

    At present, those earnings are supposed to be taxed at a 35 percent rate, but many companies avoid that through the loophole that defers taxation on active income that is not brought into the United States, or repatriated.

    The US$238 billion raised from the one-time tax would fund repairs and improvements to roads, bridges, transit systems and freight networks that would replenish the Highway Trust Fund as part of a US$478 billion package, the White House said.

    The annual budget proposal is as much a political document as a fiscal roadmap, requiring approval from Congress. Given Washington’s current political division, much of what will be laid out yesterday is unlikely to become law.

    Obama’s budget will set a spending target of US$4 trillion for fiscal year 2016, including a US$474 billion deficit, which would represent a manageable 2.5 percent of U.S. gross domestic product, The New York Times reported Sunday. The budget also includes US$105 million for “trade adjustment assistance” to help workers who have been affected by free trade pacts, it said.

    Obama’s latest tax proposals are part of a broad tax reform package that he said is meant to help middle-income Americans.

    Tax reform has eluded Washington for decades. There has been renewed talk about it this year, but consensus is still far from evident. Obama has already offered to cut the corporate income tax, but he wants to offset the revenue losses that would result by closing loopholes.

    The White House said that under the new approach to foreign earnings companies would have to pay a 19 percent tax on all foreign earnings as they earn them, while continuing to get tax credits for foreign taxes paid.

    The president’s proposal also includes cracking down on corporations that shift profits to tax havens to avoid paying their fair share or undertake “inversion” deals in which they reincorporate abroad to avoid paying U.S. taxes.(SD-Agencies)