Tax Havens and intangibles - update

In follow up to my posting yesterday, it looks like the Obama plan sidesteps the issues I raised. As the New York Times reports:

The most widely used tactic not covered by the plan is known as transfer pricing, which multinational corporations employ routinely to reduce the taxes they owe to the United States by keeping their profits offshore in low-tax or no-tax havens.

The story goes on to say:

As part of the tax code, the tactic allows corporations, typically Fortune 500 companies like Wal-Mart, Exxon Mobil and General Electric, to reduce their United States taxes by calculating the prices they charge on goods and services transferred between their global divisions.
While corporations are supposed to compute those costs as if they had been assessed between independent, neutral entities, and to pay any taxes owed on them -- the top rate is around 35 percent -- corporations often fudge the numbers to their advantage, according to senior analysts.
In other words, corporations routinely abuse the tactic to minimize their taxes by undercharging or overpaying their foreign subsidiaries for goods and services.
With the Obama plan closing other loopholes, corporations are "now going to get crazy with their transfer pricing," said Lee Sheppard, a commentator for Tax Analysts, a trade publication.

Much of the commentary on the proposal has been skeptical - pointing out the possible negative competitiveness implications (for example, see New York Times, Wall Street Journal, Washington Post). Much of the speculation is that this is part of the larger budget battles. Robert Reich notes that is can be a strategic move to both create a bargaining chip for corporate support on health care and a way to make the deficit hawks come to the table on the costs of health care reform (by proposing a way to pay for health care via the tax haven crack down).

My own sense is that this is more an opening salvo in a future tax reform battle. By laying down this marker early, the Administration is beginning the positioning for that fight. If I am right, then tax reform might be on the agenda sooner rather than later. At that time, I hope the issue of transfer pricing -- including of intangibles -- is back on the table.