Exclusive: Curbing tax-driven business moves abroad a priority - Treasury

Wed Apr 30, 2014 12:52pm EDT

The ticker symbol for AstraZeneca is displayed next to a ticker for Pfizer on the floor of the New York Stock Exchange April 28, 2014. REUTERS/Brendan McDermid

The ticker symbol for AstraZeneca is displayed next to a ticker for Pfizer on the floor of the New York Stock Exchange April 28, 2014.

Credit: Reuters/Brendan McDermid

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(Reuters) - The Obama administration is focused on finding ways to curb tax-motivated reincorporations to other countries by U.S. businesses, a U.S. Treasury official told Reuters on Wednesday.

"Cracking down on companies that reincorporate overseas to reduce their U.S. taxes is a priority for the administration," a Treasury official said in an emailed statement.

U.S. drugmaker Pfizer Inc said on Monday it has made takeover bids for UK rival AstraZeneca Plc in a possible deal to merge the two into a UK holding company with a UK tax domicile. The proposed deal would keep the operational headquarters in New York.

Such deals, known as "inversion" transactions have been growing in popularity, and President Barack Obama's 2015 budget included a proposal to crack down on inversions. But with the U.S. Congress deadlocked over tax-and-spending policy, the chances of the inversion rule proposal becoming law soon were slim.

"Inversion transactions illustrate the need for comprehensive business tax reform that would lower corporate tax rates and limit the ability of multinationals to shift income outside the U.S.," the Treasury official said, noting that the administration knows such deals "are occurring and aren't being caught by the current rules."

About 50 U.S. companies have done similar "inversion" transactions in the past 30 years, in which they relocate their tax residences to lower-tax countries via corporate deals. About half of these transactions have occurred since 2008.

Omnicom Group Inc, the biggest U.S. advertising company, is in the midst of a trying to merge with French rival Publicis Groupe SA into a Netherlands-based holding company with a UK tax domicile, though the deal has encountered delays.

The Obama proposal would tighten tax rules to make inversions more difficult to carry out.

The U.S. Internal Revenue Service on Friday issued a notice limiting shareholders' tax-free treatment in inversions.

(Reporting by Kevin Drawbaugh; Editing by Howard Goller and Leslie Adler)

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Comments (4)
unionwv wrote:
“The Obama proposal would tighten tax rules to make inversions more difficult to carry out.”

No wonder the U.S. economy is now “growing at a 0.2% annual rate.

Obama’s collectivist convictions always result in attempts to force business into his control-freak behaviour pattern.

Apr 30, 2014 1:00pm EDT  --  Report as abuse
disenwit wrote:
simple … reduce the corporate taxes… increase tax rates on the executives if you want, but not on the corporations.. tax the dividends and capital gains as regular income but not the corporations.

Apr 30, 2014 1:14pm EDT  --  Report as abuse
disenwit wrote:
simple … reduce the corporate taxes… increase tax rates on the executives if you want, but not on the corporations.. tax the dividends and capital gains as regular income but not the corporations.

Apr 30, 2014 1:14pm EDT  --  Report as abuse
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