WASHINGTON May 19 Corporate tax-dodging deals
known as inversions, in which a U.S. multinational shifts its
tax domicile to a lower-tax country, would be restricted under
legislation to be proposed in both houses of Congress by
Democrats on Tuesday.
Representative Sander Levin and Senator Carl Levin, brothers
from Michigan, will both propose bills, aides said.
Public hearings may follow, shining a light on the
increasingly popular inversion strategy. But analysts said it
was unlikely that legislation could win approval anytime soon
with Congress deadlocked over fiscal policy.
"A fresh wave of deals could increase chances that a bill
could move. But for now odds of enactment are well below 50
percent," said Greg Valliere, chief political strategist at the
independent Potomac Research Group.
The Levin proposal could face opposition in the
Republican-led House of Representatives, although Dave Camp,
chairman of the tax-writing House Ways and Means Committee, has
put forward proposals to end inversions.
"It is a real problem when the tax code provides an
incentive for U.S-based companies to move overseas, often times
taking good jobs with them," Camp said last month.
Two major inversion deals were launched recently. Both have
stumbled. One was a possible combination of U.S. advertising
firm Omnicom Group Inc with French rival Publicis Groupe
SA. That deal collapsed.
The other was U.S. drugmaker Pfizer Inc's pursuit of
UK competitor AstraZeneca Plc. That deal was thrown into
doubt on Monday when AstraZeneca rejected Pfizer's latest offer.
Several smaller inversion transactions have succeeded. A
Reuters review showed about 50 such deals have been done in the
past 25 years, with half occurring since the 2008-2009 credit
U.S. drugstore chain Walgreen Co has been under
pressure from some investors to do an inversion with European
rival Alliance Boots Holdings Ltd, the Financial Times
said. Walgreen bought a 45-percent stake in Alliance Boots in
2012, with an option to buy the rest in 2015.
While legal, inversions typically involve the acquisition by
a U.S. company of a foreign company, then a restructuring
allowing the U.S. company to be "reflagged" for tax purposes to
the foreign company's home or elsewhere.
Both Omnicom and Pfizer proposed relocating their tax
domiciles to Britain, which has a lower corporate income tax
rate than the United States.
There are some restrictions on these deals, which erode the
U.S. corporate tax base. President Barack Obama earlier this
year proposed tightening the restrictions in his 2015 budget.
Separately, a private tax activist group said on Monday that
major U.S. corporations are likely saving about $550 billion a
year by holding nearly $2 trillion in profits overseas.
Urging Congress to take action, the left-leaning Citizens
for Tax Justice, based in Washington, said the use of offshore
tax havens by corporations is widespread and growing.
(Reporting by Kevin Drawbaugh; Editing by Howard Goller)