President Obama will seek to outlaw offshore tax avoidance in a bid to claw back tax from US corporations with overseas divisions.
His plan could axe tax deductions for companies earning profits in offshore jurisdictions with low tax rates, according to the BBC.
Designed to reap $210bn in tax over the next decade alone with the help of 800 federal agents to police the laws, Obama's plan also intends to "make it easier" for US companies to create jobs in the States.
Obama wants to shut tax provisions enabling firms to defer paying taxes on profits made overseas as long as earnings are invested back into the offshore subsidiaries.
"The steps I am announcing today will help us deal with some of the more egregious examples of what is wrong with our tax code," says Obama in a joint announcement with treasury secretary, Timothy Geithner.
While Obama praised "most Americans meeting their responsibilities" with regard to tax, he criticised others shirking theirs.
The president needs congressional approval for the changes before they could come into effect in 2011.
The proposals would fix a tax code "full of corporate loopholes" encouraging US companies to send jobs overseas, he says.
Currently, American firms can take deductions on the expenses of their overseas operations until after they have booked their profits in the US.
Under the new plans, this would be outlawed, yet expenses on research and experimentation would be exempt.
Furthermore, US firms are presently permitted to claim a credit against their American taxes for foreign taxes paid.
However, the Obama administration wants to curtail this practice too as it says firms take advantage by artificially increasing the amount of taxes they owe.
It also seeks to restrict the strategy allowing US-based multinational firms to shift profits to low-tax jurisdictions.
In order to prevent this, the plans would require some foreign subsidiaries to be considered as separate corporations for US tax purposes.
Obama also called for more transparency in bank accounts held by US citizens in offshore jurisdictions such as the Cayman Islands.
He proposed reporting requirements for overseas investments are tightened, with tougher penalties for investors failing to report foreign accounts.
Geithner says the package "would bring balance" to the US tax code.
However, experts have warned the proposals could hit Fortune 100 companies depending on growth of foreign markets for increasing their total earnings. Some fear it could infringe upon US corporations' positions in remaining competitive.
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