Obama proposes outlawing offshore tax avoidance

US President Barack Obama has proposed outlawing offshore tax-avoidance techniques in a move that could significantly affect companies with overseas divisions.



His proposals would mean a cut in some tax deductions for firms that earn profits in countries with low tax rates.



Mr. Obama also wants to close tax provisions that allow firms to put off paying taxes on profits made overseas as long as those earnings are invested back into the overseas subsidiaries.



At present US firms are allowed to claim a credit against their American taxes for foreign taxes paid.



But the Obama administration says some firms take advantage of this provision by artificially increasing the amount of taxes they owe.



The president also called for more transparency in bank accounts held by US citizens in tax havens such as the Cayman Islands.



Mr. Obama now needs congressional approval for the changes, which some business leaders have opposed, before they can take effect in 2011.