Corporations Exploit Loophole to Engage in Overseas 'Inversions,' Avoiding Payment of U.S. Taxes

Posted Aug. 13, 2014

MP3 Interview with Rebecca Wilkins, senior counsel for federal tax policy with Citizens for Tax Justice, conducted by Scott Harris

inversions

The issue of corporate tax inversions has come into focus in recent months with the pharmacy retail chain Walgreen’s reluctant decision not to immediately relocate its headquarters to Switzerland in order to avoid paying U.S. taxes. Pharmaceutical giant Pfizer had attempted a tax inversion when it sought to acquire U.K.-based drug company AstraZeneca. Although the deal fell through in May, Pfizer is reported to be considering launching another takeover bid this fall. Last March, Chiquita Brands International, the nation’s largest importer of bananas, announced it would merge with the Irish fruit company Fyffes, and relocate its corporate headquarters to Ireland.

An increasing number of U.S.-based companies have been preparing to embark on tax inversions by acquiring overseas companies and then relocating their corporate offices to foreign cities for the purpose of tax avoidance. In response, the U.S. Treasury Department has warned that immediate and strict action will be taken against companies planning tax inversions. It’s estimated that the U.S. Treasury loses between $30 billion and $90 billion a year in tax revenue due to companies setting up offshore tax shelters and engaging in tax avoidance schemes like inversion.

In a late July radio address, President Obama charged that companies engaging in tax inversions are "technically renouncing their U.S. citizenship," and called for short-term steps to block what he labeled an “unpatriotic tax loophole.” Congressional legislation being proposed by U.S. Sen. Carl Levin, D-Michigan and his brother, Rep. Sander Levin, D-Michigan, would effectively block future corporate tax inversions. Between The Lines’ Scott Harris spoke with Rebecca Wilkins, senior counsel for federal tax policy with Citizens for Tax Justice, discusses her group's support for fixing tax code loopholes and passing new legislation to discourage corporate tax inversions.

For more discussion and articles about corporate tax avoidance, visit Citizens for Tax Justice at http://www.ctj.org/.

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