Global Tax 50 2014: Jacob Lew
US treasury secretary
On the official side of the inversions debate, Jacob "Jack" Lew has been the most influential figure in 2014. Reacting to the spike in the number of US companies looking at the option of inverting out of the country, Lew was a sensible and balancing voice in the debate. He did not go as far as Senate Finance Committee chairman Ron Wyden's "virus" comments, but he did call for a "new sense of economic patriotism".
Lew also acknowledged that broader tax reform would be preferableto targeted legislation to deal with inversions, but later said action on inversions could not wait.
"While comprehensive business tax reformthat includes specific anti-inversion provisions is the best way to address the recent surge of inversions, we cannot wait to address this problem. Treasury will continue to review a broad range of authorities for further anti-inversion measures as part of our continued work to close loopholes that allow some taxpayers to avoid paying their fair share."
The Treasury and IRS released proposed regulations in January to address the use of certain disqualified stock in corporate inversions, and this was followed by further anti-inversion legislation. On May 20 the Levin brothers – Senator Carl (Global Tax 50 2013 member) and Representative Sander – released the Stop Corporate Inversions Act of 2014, and this was followed later in the year by new anti-inversion rules, applicable from September 22.
These rules had two general aims: to broaden the scope of section 7874 to make it more difficult for US companies to implement inversions; and to limit the ability of a post-inversion foreign parent to access cash from the US company's controlled foreign corporations in a tax efficient manner.
"These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact and, when possible, stopping them altogether," said Lew, who previously stated he wants to see "business decisions for business reasons, not for tax purposes".
Unsurprisingly, not everybody welcomed Lew's Treasury Notice.
"I find the existing anti-inversion laws and the proposals to tighten them somewhat troubling," said Jim Ditkoff, senior VP – tax and finance – at Danaher Corporation, at the time Lew announced the proposed regulations. "It's like the Berlin Wall. If you have a free society that wants to encourage business enterprise, why do you need to build a wall to keep your people or your businesses from escaping?"
Having been the domestic policy adviser to House Speaker Thomas "Tip" O'Neill between 1979 and 1987 – a period which includes the last time fundamental tax reform was achieved in the US (1986), driven in part by O'Neill – Lew should be well-placed to galvanise bipartisan efforts to bring the US code into the 21st century. His former position as President Obama's chief-of-staff should also mean he has the relationships on Capitol Hill to be an influential driver of reform efforts in the next two years.
Another encouraging sign for US reform advocates is that Lew must have read the June 2014 issue of International Tax Review which carried the "Berlin wall" comments from Ditkoff above. At the beginning of December, in a commencement address at the Georgetown University McCourt School of Public Policy, Lew spoke of the importance of bipartisanship, saying the "pendulum is swinging back to getting things done in a bipartisan way".
He encouraged the audience to find ways to "break down those walls" and "work with those who hold different views to fashion honourable compromises that will move our country forward".
Right message; wrong audience. To increase his influence in 2015 and beyond, he now needs to take those sentiments back to the Hill.
The Global Tax 50 2014
Gold tier (ranked in order of influence)
1. Jean-Claude Juncker 2. Pascal Saint-Amans 3. Donato Raponi 4. ICIJ 5. Jacob Lew 6. George Osborne 7. Jun Wang 8. Inverting pharmaceuticals 9. Rished Bade 10. Will Morris
Silver tier (in alphabetic order)
Joaquín Almunia • Apple • Justice Patrick Boyle • CTPA • Joe Hockey • IMF • Arun Jaitley • Marius Kohl • Tizhong Liao • Kosie Louw • Pierre Moscovici • Michael Noonan • Wolfgang Schäuble • Algirdas Šemeta • Robert Stack
Bronze tier (in alphabetic order)
Shinzo Abe • Alberto Arenas • Piet Battiau • Monica Bhatia • Bitcoin • Bono • Warren Buffett • ECJ Translators • Eurodad • Hungarian protestors • Indian Special Investigation Team (SIT) • Chris Jordan • Armando Lara Yaffar • McKesson • Patrick Odier • OECD printing facilities • Pier Carlo Padoan • Mariano Rajoy • Najib Razak • Alex Salmond • Skandia • Tax Justice Network • Edward Troup • Margrethe Vestager • Heinz Zourek