US President Donald Trump was yesterday to sign an executive order directing US Secretary of the Treasury Steven Mnuchin to review any significant tax regulations from last year, especially those that might burden Americans.
The US president was also to sign memos related to the designation process of systemically important banks and to orderly liquidation authority.
Trump was to visit the US Department of the Treasury to sign the order, which is aimed at identifying and reducing regulatory burdens that “add undue complexity” and “exceed statutory authority,” the White House said in a statement.
Under former US president Barack Obama, the US Treasury sought to rein in US companies’ attempts to shift their profit offshore by proposing rules that would curb so-called “earnings stripping” and inversions — mergers in which US companies transfer their tax address overseas to low-tax countries like Ireland to cut their tax bills.
Some of those rules, first proposed in April last year, sought to restrict lending among subsidiaries of the same corporate parent, a technique that can create income in low-tax countries and tax-deductible interest payments in the US.
The proposed rules met a barrage of criticism from corporations and tax lawyers, who complained that they went too far by banning common, everyday cash-management practices that have nothing to do with tax avoidance.
Amid the criticism, the US Treasury in October last year softened the proposed rules to allow cash pooling, a common corporate money-management technique in which excess cash in subsidiaries is swept daily into a single pool.
It also delayed until Jan. 1 next year a related proposal that would require companies to extensively document their related-party lending.
One of the memos Trump were to sign would require a review of the Financial Stability Oversight Committee’s designation process for systemically important banks — and risks created by such designations.
The other would review orderly liquidation authority, with a report due to the US president within 180 days, and examine whether enhanced bankruptcy authority is a better alternative for failing financial companies.
It would also look at the adverse impact of failing financial firms and whether availability of bankruptcy authority could lead to excessive risk-taking.
Trump in February signed an executive order instructing regulators to examine financial rules and file a report on their findings, starting what the administration has promised will be a broad overhaul.
The US House of Representatives earlier this month approved legislation to create a new bankruptcy process for financial companies with more than US$50 billion in assets that could allow for a quick transfer of a failed bank’s assets and impose a temporary stay of some contractual rights to give the company time to restructure.
The measure aims to address concerns that led lawmakers to approve taxpayer bailouts during the 2008 credit crisis. At the time, the structures of Wall Street banks were considered too complex to go through bankruptcy court.
The 2010 financial regulation law known as Dodd-Frank established a so-called orderly liquidation authority under which the Federal Deposit Insurance Corp is empowered to untangle and wind down the biggest banks.
Republican lawmakers have said the law does not address the fact that Wall Street firms remain too big to fail, meaning taxpayers will still be on the hook for rescues.
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