The Congressional Research Service — a policy research arm of Congress — recently told Congress 76 U.S. corporations have shifted their tax domiciles out of the United States to other countries since 1983, to avoid U.S. taxes.
Moving the tax domicile is known as an “inversion”. It still is rare, but it is becoming more common. The Congressional Research Service said 47 such deals have been done in the last 10 years and more are in the works.
Medtronic Inc said recently it plans to buy Covidien Plc, a rival based in low-tax Ireland. Analysts said the deal is driven, at least in part, by tax considerations.
Democratic Rep. Sander Levin said, “Barely a week seems to pass without news that another corporation plans to move its address overseas simply to avoid paying its fair share of U.S. taxes….”.
Sen. Richard Durbin said he hoped drugstore chain Walgreen Co. would not do a potential inversion into Swiss based retailer Alliance Boots Holding, Ltd. Walgreen is quoted as saying “…it will do what is in the best interests of the company and its shareholders…”.
An international law firm (Cadwalader, Wickersham & Taft) after one of its top partners met in Dublin with Irish Prime Minister Enda Kenny, said, “…The country’s (Ireland) tax regime is coming under increasing scrutiny by the EU for the aggressive tax planning strategies by foreign multinationals…”. “It is important that U.S. and other multinational corporations seeking to re-incorporate in Ireland do so with an eye towards making meaningful connections with the country”.
An inversion is in where a U.S. company’s relocation means chiefly a new street address and little if any additional jobs are created for the new host country. It just saves U.S. corporation income tax which is higher than almost all other countries. The host country gets a little tax, but even that little is better than nothing.
Some other recent inversions have been structured to set up new tax domiciles in Britain, the Netherlands and Switzerland.
Regrettably, it seems unlikely any U.S. tax laws with be changed this year. There is another election coming. To lower the U.S. corporation income tax rate seems just too difficult and time consuming to get it done now.
Maybe we should all contact our folks in Congress and ask them to try to find time to deal with this (and other tax law reforms) in the next 60 days?
Did you hear? “Nobody is so busy that they can’t make time for the people they really care about,” Leila Sales.
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.