Reuters News - Chinese economy more sustainable now: China central bank

China Central Bank Deputy Governor Yi Gang walks to a family photo after a meeting of G-20 finance ministers and central bank governors during the IMF-World Bank annual meetings in Washington October 10, 2014.

CREDIT: REUTERS/JONATHAN ERNST

(Reuters) - China's economy is now more sustainable and domestic consumption is steadily rising, Chinese Central Bank Vice Governor Yi Gang told a G20meeting of finance officials earlier this week.

Yi's remarks came after China posted its slowest economic growth in 24 years in 2014, with a cooling housing market, slowing investment and recent underwhelming exports expected to weigh further on domestic demand this year.

To stoke growth and bank lending, China's central bank last week reduced the amount of cash that banks have to hold as reserves for the first time in over two years. That was after it had unexpected cut interest rates in November.

Finance officials from the Group of 20 leading economies sketched an uncertain outlook for global growth on Tuesday and vowed to use monetary and fiscal policy if needed to stem any risk of stagnation.

Yi also was quoted on the central bank's website on Wednesday as saying that the central bank was closely monitoring China's property market and shadow banking sector, and increasing the transparency of the nation's local government debt.

China's shadow banking business, which includes investment trusts and bill acceptances, ballooned to 45 trillion yuan ($7.21 trillion) at the end of 2014, according to estimates by ratings agency Moody's Investors Service.

That amounted to 71 percent of China's economy, compared to 66 percent at the end of 2013, Moody's said.

(Reporting by Koh Gui Qing; Editing by Kim Coghill)

BBC News - Greece's Tsipras defiant over economic plans

Prime Minister Alexis Tsipras of Greece has said he is sticking to plans to roll back austerity and rejecting an international bailout extension.

Alexis Tsipras said Greece wanted to service its debt - but couldn't

He said Greece, unable to service its debt, would instead seek a bridge loan.

He told parliament he would keep all pre-election pledges, promising to raise the minimum wage, pay a pension bonus and rehire public workers.

Mr Tsipras's far-left Syriza party won elections last month on a promise to end austerity measures.

EU officials have rejected his efforts to renegotiate Greece's bailout terms.

"The bailout failed," Mr Tsipras said on Sunday, in his first major speech to parliament since becoming prime minister. "The new government is not justified in asking for an extension... because it cannot ask for an extension of mistakes."

"After five years of bailout barbarity, our people cannot take any more."

'Humanitarian crisis'

In last month's elections, Syriza fell just short of an outright majority and formed a coalition government with the right-wing Independent Greeks.

On Sunday, Mr Tsipras said the government's "irreversible decision is to implement in full our pre-elections pledges".

The first priority, he said, was "tackling the big wounds of the bailout, tackling the humanitarian crisis".

Greeks demonstrated in Athens this week in support of the new government's stance

That included giving free food and electricity to those worst affected by the economic crisis and ending an unpopular annual levy on private property.

Among other commitments outlined on Sunday were:

• a gradual rise in the minimum wage to €751 (£557; $850) by 2016
• payment of a bonus to low-income pensioners
• reinstatement of public sector employees "fired illegally"
• the creation of a new national broadcaster

Two of the measures - raising the minimum wage and restoring a tax-free threshold to €12,000 - contravene reforms made previously as conditions for receiving bailout money.

Mr Tsipras also announced a number of measures aimed at cutting costs or raising revenue, including

• a new tax on large properties
• a special portfolio to oversee fight against corruption and tax evasion
• a pension fund using revenues from natural resources
• cutting ministry cars and government aeroplanes.

Five things Syriza wants to change

The Greek prime minister also repeated demands that Germany - Greece's biggest creditor - pay reparations for World War Two and repay a loan that the Nazis forced the Bank of Greece to pay when they occupied Greece.

Greece had "a moral obligation to our people, to history, to all European peoples who fought and gave their blood against Nazism", he said.

Diplomatic tour

Greece's current programme of loans ends on 28 February. A final €7.2bn is still to be negotiated, but Greece wants permission to issue additional short-term debt while it seeks a new deal.

Mr Tsipras said Greece wanted to service its debt. "If our peers want so, too, they are invited to come to the table of dialogue so we can discuss how to make it viable," he added.

Mr Tsipras and his Finance Minister, Yanis Varoufakis, went on a diplomatic tour this week to try to reassure eurozone leaders about their plans.

However, Jeroen Dijsselbloem, who chairs the Eurogroup made up of eurozone finance ministers, said on Friday that Greece had to apply for a bailout extension if it wanted continued backing from the eurozone. "We don't do bridging loans," he said.

The European Central Bank has also issued a statement saying Greek banks could no longer access ECB credit by using Greek government bonds or bonds guaranteed by the government.

Greek debt stands at more than €320bn, or about 174% of Greece's economic output.

Eurozone finance ministers are due to meet on Wednesday to discuss Greece's debt proposals.

Mr Varoufakis told Italian television on Sunday that the euro was as "fragile" as a house of cards. "If you take out the Greek card the others will collapse," he said.

Bloomberg News - Devaluation Edges Ukraine Closer to IMF Aid Amid Merkel Visit

People buy food at the central market in Donetsk, Ukraine, on Feb. 4. The country needs about $15 billion of “additional, incremental” funding, Finance Minister Natalie Jaresko said Tuesday. Photographer: Dominique Faget/AFP/Getty Images

Ukraine, whose economy has been battered by a war against pro-Russian rebels, is moving closer to winning desperately needed financial support from abroad.

The country devalued its currency by 33 percent Thursday, a move that earned praise from the International Monetary Fund amid talks for a bailout and boosted optimism among bond investors. Ukraine’s $17 billion of foreign notes gained the most in almost two weeks.

Ukraine is seeking to stave off a default as intensifying fighting between government troops and pro-Russian rebels in the nation’s east pummels the economy and pushes its foreign reserves to an 11-year low. While an IMF mission is in Kiev discussing an extension to a $17 billion bailout from 2014, German Chancellor Angela Merkel and French President Francois Hollande met with Ukrainian President Petro Poroshenko Thursday in a bid to resolve the 10-month conflict.

“It brings Ukraine closer to ultimately unlocking funds from the IMF and other official lenders,” Marco Santamaria, a money manager at AllianceBernstein LP, which oversees $27 billion of emerging-market debt, said in an e-mail. “It does appear that there is a stronger diplomatic initiative being put together, but the outcome ultimately rests in Mr. Putin’s hands.”

Merkel and Hollande are headed to Moscow to present a counter-proposal to a cease-fire plan drawn up by Russian President Vladimir Putin.

Conflict Worsening

European Union foreign-policy chief Federica Mogherini called Wednesday for an immediate, three-day cease-fire to allow evacuation from the railway crossroads of Debaltseve, the scene of the fiercest fighting. The violence has killed more than 5,000 people and wounded over 12,000, the United Nations estimates.

Ukraine needs about $15 billion of “additional, incremental” funding, Finance Minister Natalie Jaresko said Tuesday. The government plans to consult with holders of its sovereign bonds about a potential restructuring after finalizing new IMF cash, she said.

While discussing an expanded bailout, the Washington-based IMF is seeking to limit its share of the burden, according to two people with knowledge of the institution’s stance. The IMF doesn’t want to provide more than two-thirds of a new loan, said one of the people, who requested anonymity because the discussions are private.

Hryvnia Sinks

Central bank Governor Valeriya Gontareva scrapped the hryvnia’s indicative rate and canceled daily currency auctions to help eliminate what she called “multiple exchange rates” in interbank and unofficial markets. The IMF is supportive of the bank’s latest decisions, Gerry Rice, a spokesman for the lender, said at a briefing in Washington.

The hryvnia retreated to a record 25 per dollar at 6:20 p.m. in Kiev on Thursday. Ukraine’s dollar-denominated bonds due in July 2017 rose to a five-day high of 53.37 cents on the dollar, sending yields down to 41.13 percent.

While a more flexible exchange rate is a precondition for IMF support, the devaluation is no cause for optimism, said Lutz Roehmeyer, who owns Ukrainian debt among the $1.1 billion of emerging-market assets he oversees at Landesbank Berlin Investment Gmb.

“The situation in Ukraine is worse than I thought,” Roehmeyer said by e-mail from Berlin. The hryvnia’s drop “is just a realization of the truth by officials that fundamentals have weakened a lot.”

‘Long Overdue’

The former Soviet republic is also facing a potential demand from Russia for the early repayment of a $3 billion loan that was part of a rescue agreed by Putin and former Ukrainian President Viktor Yanukovych in December 2013.

The central bank said Dec. 30 that Ukraine’s economy probably shrank 7.5 percent in 2014.

“This devaluation is long overdue, and helps the economy to rebalance and eventually gain some growth momentum,” Bryan Carter, who helps manage about $350 million of emerging-market debt at Boston-based Acadian Asset Management, said in an e-mail. “The country is in recession and has lost competitiveness versus other currencies in the region that have devalued over the past year.”

To contact the reporters on this story: Lyubov Pronina in London atlpronina@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net; Marton Eder in Budapest at meder4@bloomberg.net

Reuters News - ECB cancels soft treatment of Greek debt in warning to Athens

Greek Finance Minister Yanis Varoufakis answers a journalist's questions in a restaurant behind the new European Central Bank (ECB) headquarters in Frankfurt February 4, 2015.

CREDIT: REUTERS/KAI PFAFFENBACH

(Reuters) - The European Central Bank abruptly canceled its acceptance of Greek bonds in return for funding on Wednesday, shifting the burden onto Athens' central bank to finance its lenders and isolating Greece unless it strikes a new reform deal.

The move, which means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks, was a response to what many in Frankfurt see as the Greek government's abandoning of its aid-for-reform program.

The decision came just hours after Greece's new finance minister, Yanis Varoufakis, emerged from a meeting with ECB President Mario Draghi to say the ECB would do "whatever it takes" to support member states such as Greece.

In stark contrast, the ECB move, which required the support of a majority of central bank chiefs across the euro zone, shows widespread dismay with the new Greek government's plans not only in Frankfurt but across the 19-country bloc.

The ECB announced its decision, which will take effect from Feb. 11, after those governors met in Frankfurt on Wednesday.

It means that the tens of billions of euros of Greek government bonds as well as bank bonds guaranteed by Athens will no longer qualify as security in return for ECB funding to those banks.

Instead, it will now be up to Greece's central bank to provide those banks with Emergency Liquidity Assistance (ELA), a step it takes at its own risk, ringfencing those banks' funding problems from the rest of the euro zone.

Were the central bank to run into difficulties as a result, it would be up to the debt-strapped Greek government, which can ill afford it, to step in.

The unexpected ECB move followed an appeal from Greece's new leftist government to the ECB to keep its banks afloat as it seeks to negotiate debt relief with its euro zone partners.

The ECB has now effectively refused that request, adding to Greece's problems as Germanyrejected any roll-back of agreed austerity policies.

The ECB move was a setback for Greece's Varoufakis, who had earlier pledged speedy talks with international lenders on setting up a new program of reform after abandoning its earlier aid plan.

It puts Greek banks in a difficult position. Two Greek banks had already begun to tap emergency liquidity assistance from the Bank of Greece after an outflow of deposits accelerated after the victory of the hard left Syriza party in a general election on Jan. 25, banking sources had told Reuters.

The health of Greece's big banks is central to keeping the country afloat.

Greece's Finance Ministry said on Thursday the country's banking system was fully shielded through its access to emergency liquidity assistance available from the domestic central bank.

The ministry also said the ECB's decision puts pressure on the Eurogroup to reach a deal that would be "mutually beneficial" for both Athens and its eurozone partners.

Under emergency liquidity assistance, the national central bank can lend to commercial banks, but borrowing from the domestic central bank's ELA window against various types of collateral is more expensive than ECB funding.

GERMAN RESISTANCE

Promising to end five years of austerity, Prime Minister Alexis Tsipras and Varoufakis are meeting senior officials across Europe to seek support for a new debt agreement.

But a document prepared by Germany for a meeting of EU finance officials on Thursday made clear Berlin wants Athens to go back on promises to raise the minimum wage, halt unpopular sales of national assets, rehire fired public sector workers and reinstate a Christmas bonus for poor pensioners.

"The Eurogroup needs a clear and front-loaded commitment by Greece to ensure full implementation of key reform measures necessary to keep the program on track," the document, seen by Reuters, said in reference to euro zone finance ministers.

"The aim is the perpetuation of the agreed reform agenda (no roll back of measures), covering major areas as the revenue administration, taxation, public financial management, privatization, public administration, health care, pensions, social welfare, education and the fight against corruption."

The new Greek leaders have had a cool reception even in left-leaning countries such asFrance and Italy which Athens had hoped would support its case for debt relief.

French President Francois Hollande said the euro zone's rules applied to everyone. European Parliament President Martin Schulz, a Socialist, said Greece risked bankruptcy if the country did not stick to its commitments to EU partners.

'NO DOUBT'

Tsipras, 40, said after talks with European Commission President Jean-Claude Juncker thatGreece respected European Union rules and would find a solution to its economic problems within the framework of EU law.

After meeting Draghi, Varoufakis told Reuters: "The ECB is the central bank of Greece. ... The ECB will do whatever it takes to support the member states in the euro zone."

Without the support of its creditors and the ECB, Greece may soon find itself back in an acute financial crisis. Unable to tap the markets because of sky-high borrowing costs, the government has enough cash to meet its funding needs for the next couple of months. But it faces around 10 billion euros ($11 billion) of debt repayments over the summer.

"We outlined to him the main objectives of this government, which is to reform Greece in a way that has never been tried before and with a determination that was always absent," Varoufakis said after his session with Draghi.

"We also stated categorically that the debt-deflationary cycle in which Greece finds itself is detrimental to all efforts to reform Greece."

With the Greek public determined to cast off the stigma of supervision by a troika of EU, IMF and ECB inspectors, and to regain economic sovereignty, the semantics of any new arrangement may be crucial.

A source familiar with the Greek position said after the talks with Draghi: "We are thinking of a bridging program. You may not call it a 'program' for political reasons but perhaps a contract."

The German document demanded that troika oversight continue.

ECB officials in the meeting talked about the rules on emergency funding and their desire that the Greeks reach an interim arrangement with the Eurogroup of euro zone finance ministers, which next meets on Feb. 16, the source said.

Tsipras won the election promising to negotiate a debt write-off, reverse some key reforms and end budget cuts.

BY JOHN O'DONNELL AND JAN STRUPCZEWSKI

BBC News - Cautious hope for Greece debt deal as leaders tour Europe

Greece's leaders have received a guarded welcome to their reported proposals for a debt deal, ahead of crunch talks with EU creditors.

Yanis Varoufakis has repeatedly stressed his refusal to work with the "troika" overseeing Greek debt

After a meeting in Rome with Greek PM Alexis Tsipras, Italian PM Matteo Renzi said his country would "give Greece a hand" without always agreeing with it.

Greek Finance Minister Yanis Varoufakis has reportedly suggested a new deal for exchanging debt with bailout creditors.

The radical left Greek government was elected on a pledge to end austerity.

The Syriza party, led by Mr Tsipras, won last Sunday's vote by promising to write off half the country's massive debt, sparking alarm on the markets and among eurozone officials.

The Greek government also said it would refuse new loans from the EU and the IMF, prompting questions about how it would finance itself.

This week, however, Greek leaders on a tour of European capitals sought to allay some of the concerns.

According to the Financial Times newspaper, Mr Varoufakis has retreated from the idea of writing off debt, instead suggesting that it could be exchanged for bonds that would be repaid only if the Greek economy grew.

In Rome, Mr Renzi presented Mr Tsipras - noted for his informal attire - with an Italian tie

The president of the European Commission, Jean-Claude Juncker, has said the bloc will "have to adapt a certain number of policies" to accommodate Greece.

Mr Tsipras meets Mr Juncker in Brussels on Tuesday. He will also travel to France to meet President Francois Hollande, whose government has also suggested a softer line on Greece.

At the meeting with Mr Renzi in Rome on Tuesday, Mr Tsipras said Europe had to "put social cohesion and growth before the policies of poverty and insecurity".

Mr Renzi echoed him, saying that the world was "calling on Europe to invest in growth, not austerity".

However, he did not comment on the details of Greece's proposals.

Despite the conciliatory remarks, many hurdles remain.

"Varoufakis is intelligent, but he is underestimating the problems," a eurozone official quoted by the Reuters news agency said.

'Ending the addiction'

Greece still has a debt of €315bn - about 175% of GDP - despite some creditors writing down debts in a renegotiation in 2012.

German Chancellor Angela Merkel has ruled out debt cancellation, saying creditors had already made concessions.

This week, Mr Varoufakis said that he wanted a new plan for fiscal stimulus in place by the end of May, with repayment of existing debt tied to Greece's ability to restore growth.

Greek economy in numbers

• Unemployment is at 25%, with youth unemployment almost 50%
• Economy has shrunk by 25% since the start of the eurozone crisis
• Country's debt is 175% of GDP
• Borrowed €240bn (£188bn) from the EU, the ECB and the IMF

Mr Varoufakis added that he would negotiate separately with the European Commission, the IMF and the European Central Bank but not with officials representing all three - the so-called "troika", which he described as a "committee of technocrats".

The troika agreed a €240bn (£179bn; $270bn) bailout with the previous Greek government.

Austerity measures imposed in an effort to manage the debt prompted outrage in Greece and led voters to reject the previous government.

Instead, Greeks voted Syriza into power after an election campaign dominated by the party's message of change.

In interviews in the German media published on Saturday, Mrs Merkel said she still wanted Greece to stay in the eurozone but did not "envisage fresh debt cancellation".

Greece's current programme of loans ends on 28 February. A final bailout tranche of €7.2bn was still to be negotiated but the new government has already begun to roll back austerity measures.

Bloomberg News - Iranian President to Tax-Exempt Groups: Pay Up

Photographer: Ahmad Halabisaz/Xinhua/Corbis

Iran’s economy has been limping badly. The U.S.-driven sanctions imposed because of Iran’s nuclear program have curtailed its oil exports and cut off its banks from global financial networks. A 58 percent oil price slump since June has done damage, and the government is revising a draft budget that will lower the assumed price of oil to $40 a barrel from $72. The budget for the year ending in March was based on crude at $100 a barrel. After contracting 5.6 percent in 2013, the economy probably managed just 1.5 percent growth in 2014, according to the International Monetary Fund.

To make up for lost growth, Iran’s President Hassan Rouhani has called for conglomerates controlled by the Islamic Revolutionary Guard Corps and conservative religious foundations to give up their tax-exempt status and pull their weight. Although the Parliament backs Rouhani, he faces powerful groups including the Guards and Setad, a holding company controlled by the office of the Supreme Leader Ayatollah Ali Khamenei, Iran’s highest authority. Setad holds large stakes in the telecom and petrochemical industries, among others. The businesses run by the Guards and the clerics account for about a third of Iran’s economy. “We are trying to tax everyone across the board, but as soon as we touch this or that institution, they make such a stink about it,” Rouhani told business leaders in a Jan. 4 speech. “Just be aware that in some cases the domestic political lobby is very strong, very strong, more than you think.”

The Revolutionary Guards, created as an ideologically driven militia to protect the gains of the 1979 Islamic Revolution, are a major presence in Iran’s economy and politics. The Guards, who report directly to the supreme leader, entered the economic arena for the first time when their engineering company won government contracts to rebuild the country after its eight-year war with Iraq ended in 1988. Under former President Mahmoud Ahmadinejad, the Guards won thousands of projects valued at $25 billion, according to Kaleme, an opposition news website. The projects range from aerospace and construction to developing oil and gas fields. Ahmadinejad appointed former Guards commanders to key cabinet posts, including the oil ministry, further cementing their position.

Rouhani’s call for an end to tax exemptions is part of a broader struggle between moderate clerics and the Guards, who have acquired power and wealth by aligning themselves with Iran’s most conservative politicians and parties. Rouhani wants to end Iran’s isolation, find an exit from the nuclear maze, and loosen the rigid religious rules that regulate society. Khamenei has backed Rouhani in pursuing nuclear talks but is less supportive of his push for social change. Getting the Guards to disclose assets and pay taxes would be a major victory for the moderates.

23% Planned increase in tax revenue for Iran’s national budget

“The pressure to tax these entities is because the government needs the money,” says Ali Dadpay, an Iranian-born economics professor at Clayton State University in Morrow, Ga. “Everyone in Iran understands that.” Whether Rouhani’s government can lessen the impact from falling crude prices by boosting tax revenue is debatable, says Rajabali Mazroui, who once served on the Parliament’s budget planning committee and now lives in exile in Belgium. He adds that the gap can be narrowed if Rouhani “manages to collect tax from entities that didn’t pay so far.”

In December, Parliament voted to tax the Guards, Setad, and Astan Qods Razavi, a religious body that oversees the shrine of a Shiite saint. The legislation is now under review by the Guardian Council, a 12-member body that reviews all bills passed by Parliament and has veto power. Khamenei chooses half the council. Few financial details are public about the companies controlled by the Guards and other conservative groups, says Dadpay, who studies the regime. “If you can get these entities to be transparent, to show their books, that will have more benefit for the economy than the actual tax revenue collected,” he says.

Rouhani’s proposed budget for the fiscal year starting on March 21 includes an increase in tax revenue of about 23 percent, to 870 trillion rials ($32 billion), mostly through broadening the tax base. Iran plans “to catch in the net” those who evade taxes, Finance and Economy Minister Ali Tayebnia told reporters on Jan. 17. Former Presidents Mohammad Khatami and Ali Akbar Hashemi Rafsanjani also tried to turn the Guards and the religious foundations into taxpayers. “It is still possible that Rouhani plans to challenge the conservatives head-on,” says Alireza Nader, a senior analyst at Rand, the think tank. “But he’s in for a big fight, a fight that others, such as Khatami and Rafsanjani, fought and lost.”

Setad’s assets are valued at about $90 billion and include three oil companies. The Guards’ construction wing is now the biggest engineering company in Iran. Astan Qods Razavi controls 44 companies and has stakes in another 60. “The accounts of the Guards’ financial entities are like a black box,” says Saeed Ghasseminejad, a researcher on Iran at the Foundation for Defense of Democracies, a Washington-based think tank. “The government has no idea as to what goes on there.”

An added challenge comes from the multiple roles these conglomerates play. Astan Qods has profitable businesses but is also a religious charity. The Guards are fighting Islamic State in Iraq. “The issue of religious, revolutionary, and military foundations and companies is more complex than meets the eye,” says Bijan Khajehpour, managing partner of Atieh International, a consultant to Mideast businesses. “Reforming the current structure will be a long-term process.” 

Reuters News - Obama targets foreign profits with tax proposal, Republicans skeptical

U.S. President Barack Obama delivers remarks at the armed services farewell in honor of Defense Secretary Chuck Hagel at Joint Base Myer-Henderson Hall in Virginia, January 28, 2015.

CREDIT: REUTERS/YURI GRIPAS

(Reuters) - President Barack Obama's fiscal 2016 budget will seek new taxes on trillions of dollars in profits accumulated overseas by U.S. companies, and a new approach to taxing foreign profits in the future, but Republicans were skeptical of the plan on Sunday.

Reviving a long-running debate about corporate tax avoidance, Obama will target a loophole that lets companies pay no tax on earnings held abroad, the White House said. But his proposal was certain to encounter stiff resistance from Republicans.

In his budget plan to be unveiled on Monday, Obama will call for a one-time, 14 percent tax on an estimated $2.1 trillion in profits piled up abroad over the years by multinationals such as General Electric (GE.N), Microsoft (MSFT.O), Pfizer Inc (PFE.N) andApple Inc (AAPL.O).

He will also seek to impose a 19 percent tax on U.S. companies' future foreign earnings, the White House said.

At present, those earnings are supposed to be taxed at a 35-percent rate, but many companies avoid that through the loophole that defers taxation on active income that is not brought into the United States, or repatriated.

The $238 billion raised from the one-time tax would fund repairs and improvements to roads, bridges, transit systems and freight networks that would replenish the Highway Trust Fund as part of a $478 billion package, the White House said.

The annual budget proposal is as much a political document as a fiscal roadmap, requiring approval from Congress. Given Washington's current political division, much of what will be laid out on Monday is unlikely to become law.

Obama's budget will set a spending target of $4 trillion for fiscal year 2016, including a $474 billion deficit, which would represent a manageable 2.5 percent of U.S. Gross Domestic Product, The New York Times reported on Sunday. The budget also includes $105 million for “trade adjustment assistance” to help workers who have been affected by free trade pacts, it said.

Obama's latest tax proposals are part of a broad tax reform package that he says is meant to help middle-income Americans.

'ENVY ECONOMICS'

On proposed tax increases for the wealthy and large companies that are part of that package, Paul Ryan, the top Republican tax writer in the House of Representatives, said on NBC's "Meet the Press": “What I think the president is trying to do here is to, again, exploit envy economics."

Republicans, who took control of the Senate and boosted their House majority after November's congressional elections, have said tax reform is one area where they hope to find compromises with Democrats and the White House, although Obama's proposals have so far received a lukewarm reception.

On the foreign profits proposal specifically, Ryan aide Brendan Buck said in an emailed reply to questions that tax reform should be about simplifying the code and lowering rates.

"If that’s the approach the administration is willing to take, there may be room to find common ground," he said.

"There won’t be, however, if the president instead tries to sock American businesses with big tax hikes just to increase spending and add even more complexity to the code."

Tax reform has eluded Washington for decades. There has been renewed talk about it this year, but consensus is still far from evident. Obama has already offered to cut the corporate income tax, but he wants to offset the revenue losses that would result by closing loopholes. Republican proposals have varied, while generally seeking deeper cuts in the rate and fewer loophole closings.

The White House said that under the new approach to foreign earnings companies would have to pay a 19 percent tax on all foreign earnings as they earn them, while continuing to get tax credits for foreign taxes paid. After this payment, foreign earnings could be reinvested in the United States without added tax.

The president’s proposal also includes cracking down on corporations that shift profits to tax havens to avoid paying their fair share or undertake "inversion" deals in which they reincorporate abroad to avoid paying U.S. taxes.

The one-time tax "would mean that companies have to pay U.S. tax right now on the $2 trillion they already have overseas, rather than being able to delay paying any U.S. tax indefinitely," a White House official said.

"Unlike a voluntary repatriation holiday, which the president opposes and which would lose revenue, the president’s proposed transition tax is a one-time, mandatory tax on previously untaxed foreign earnings, regardless of whether the earnings are repatriated."

Corporations have been pushing for years for a tax holiday that would let them repatriate such earnings at a discounted tax rate. This was tried in 2004 under former Republican President George W. Bush. Framed as an economic stimulus, the Bush measure did result in a substantial portion of deferred profits being repatriated, but studies showed it did little for the economy.

(Additional reporting by Bill Trott; Editing by Frances Kerry)