US Companies Finding Tax Havens Abroad to Avoid Paying Uncle Sam’s Dues
The US may have come with FATCA and asked friendly countries to sign on it, but what is Uncle Sam going to do about its rapidly migrating entrepreneurs? America is seeing an economic migration of sorts; only this time it isn’t fueled by greed of gold or a depression induced poverty.
This time, America’s entrepreneurs are moving away from the homeland in order to avoid paying taxes they owe Uncle Sam. Congress’s policy research arm estimates that as many as seventy six US corporations have moved base since 1983, and the trend has intensified recently ever since America began its crackdown on tax evaders.
Tax inversions becoming common
The process of shifting the tax domicile of a corporation that is originally American out of the home country to another tax domicile is known as ‘tax inversion’. Till now, such cases were rare but of late the trend has been increasing and has gained momentum rapidly. Tax lawyers say that every such inversion procedure is a cause of concern for Washington. In the past decade itself, forty seven such deals were made and more are in the offing for sure.
The research being done by one of the policy research wings of Congress will help lawmakers understand the background of this disturbing trend and hopefully be able to help them come up with new laws to curb this flight of the moneyed. Democratic representative Sander Levin said in a statement that news of such tax inversions have become common fodder in Washington and hardly any time passes by before one hears of a new company considering this move just to be able to avoid paying taxes in the US.
The White House is clueless
The research wing has unearthed several instances of tax deals being brokered between companies. Last month, medical technology group Medtronic Inc announced its plans to buy Covidien Plc, a rival firm that is based in Ireland. Tax lawyers and analysts assume that the move has been fuelled by tax considerations because Ireland happens to have very low corporate tax rates making it a mecca for companies.
Uncle Sam’s greed is tangible
Another company that made deals to avoid taxes was Mallinckrodt Pharmaceuticals, another pharma and medical technology company in America. Along with these names, Perrigo Co Plc, Actavis Plc and other pharma companies who decided to rebase to Ireland for tax purpose have been named in the research.
US to Ireland inversions receive international attention
The reverse migration from the US to the Irish coast has garnered international recognition as well say tax lawyers in America. The meeting between international law firm Cadwalader, Wickersham & Taft, and Irish Prime Minister Enda Kennedy in Dublin on June 27th was focused solely on the US to Ireland tax inversion and its economic repercussions worldwide. The EU too has been keeping an eye on Ireland’s tax regime due to the aggressive tax planning strategies that foreign multinationals have been undertaking recently.
The EU is on the wrong side of logic and history too, just the White House is.
