WASHINGTON (Reuters) - President Barack Obama said on Wednesday his administration plans to move quickly to curb what he called a “herd mentality” by companies doing business deals that help them escape U.S. corporate taxes, saying the practice was unfair to Americans.
Obama’s comments came the day that U.S. retailer Walgreen Co backed down from its plan to use a so-called inversion to reduce its taxes. Obama did not single out Walgreen, which is based in his home state of Illinois.
In an inversion, a U.S. corporation avoids U.S. taxes by buying or setting up a foreign company and then moving its tax domicile to that foreign company and its home country.
“We don’t want to see this trend grow,” Obama said at a news conference. “That kind of herd mentality is something we want to avoid, so we want to move quickly, as quickly as possible.”
Obama made the comments in a wide-ranging news conference at the conclusion of the U.S-Africa Summit in Washington, where he hosted dozens of African leaders to discuss trade, business opportunities and security issues.
Obama said the U.S. Congress would need to pass legislation to stop the use of tax inversions entirely, but in the meantime, he plans to look for ways to discourage them.
“It’s not fair. It’s not right,” Obama said. “The lost revenue to Treasury means it has got to be made up somewhere, and that typically is going to be a bunch of hard-working Americans who either pay through higher taxes themselves or through reduced services.”
Inversion transactions have occurred at a record pace this year, but three deals have recently collapsed.
Walgreen had planned to use a takeover of Europe’s biggest pharmacy chain, Alliance Boots [ABN.UL], to move its domicile overseas, but backed down from that plan.
Obama said: “We can’t solve the entire problem administratively, but what we are doing is, are there elements to existing statutes that are interpreted by rule or by regulation or by tradition or practice that can at least discourage some of the folks who may be trying to take advantage of this loophole.”
(This version of the story was refiled to fix a spelling in paragraph one.)
Additional reporting by Jeff Mason and Annika McGinnis; Editing by Eric Beech and Mohammad Zargham