(Adds Hatch comments, paragraphs 4-9)
By Kevin Drawbaugh
WASHINGTON, July 22 Immediate government action
is needed to stop U.S. corporations from avoiding federal taxes
by shifting their tax domiciles overseas through deals known as
inversions, the head of the U.S. Senate Finance Committee said
Nine inversion deals have been agreed to this year by
companies ranging from banana distributor Chiquita Brands
International Inc to drugmaker AbbVie Inc and
more are being considered. The transactions are setting a record
pace since the first inversion was done 32 years ago.
Washington is increasingly concerned about this. "Let's work
together to immediately cool down the inversion fever ... The
inversion loophole needs to be plugged now," said Democratic
Senator Ron Wyden, finance committee chairman, at a hearing.
Several Democrats have offered bills to curb inversions,
which let companies cut their taxes primarily by putting foreign
earnings out of the reach of the Internal Revenue Service.
Wyden said his panel asked the chief executives of several
inverted companies to testify at the hearing on international
tax law problems. "None accepted our invitations," he said.
No new anti-inversion law is likely to be approved as long
as Republicans insist that such a step be accompanied by an
overhaul of the tax code, policy analysts said.
Utah Senator Orrin Hatch, the finance committee's top
Republican, said, "The ultimate answer to this problem - and the
only way to completely address the issue of inversions - is to
reform our tax code.
"However, as I've also said publicly, there may be steps
that Congress can take to at least partially address this issue
in the interim ... Whatever approach we take, it should not be
retroactive or punitive. And it should be revenue neutral."
Hatch said he does not support recent bills introduced by
A senior official from the U.S. Treasury Department,
speaking to the committee, reiterated the Obama administration's
call for urgent action by Congress to implement a White House
proposal to make inversions more difficult to do.
"Congress should pass legislation immediately with an
effective date of May 2014 to prevent companies from effectively
renouncing their citizenship to get out of paying taxes," said
Robert Stack, deputy assistant secretary at the Treasury.
"We are aware of many more inversions in the works right
now," he added.
But the Republican-controlled U.S. House of Representatives
will not act on inversions "unless there's comprehensive tax
reform, and that's dead for this year," said Greg Valliere,
chief political strategist at Potomac Research Group.
Inversions are still rare, but they are becoming more
common. Of the roughly 60 deals done since 1982, more than half
have come in just the last six years, a Reuters review showed.
An inversion involves a U.S. corporation buying or setting
up a smaller company abroad, then shifting its tax home base to
that company's country, which typically has lower tax rates than
in the United States. Such deals usually mean opening a small
office abroad for tax purposes, leaving major operations intact.
(Editing by Tom Brown and David Gregorio)