WASHINGTON May 20 Taking aim against corporate
tax avoidance, 14 Senate Democrats called on Tuesday for curbs
on U.S. multinationals that shift their tax domiciles abroad in
deals known as "inversions."
While still rare, the deals are becoming more common, with
two recently attempted transactions by Pfizer Inc and
Omnicom Group Inc drawing attention to the strategy.
Under legislation introduced by Senator Carl Levin and other
Senate Democrats, a two-year moratorium would be imposed on
inversions, with minimum foreign ownership levels also raised.
"Our legislation would clamp down on this loophole to
prevent corporations from shifting their tax burden onto their
competitors and average Americans," Levin said in a statement.
The bill, to be introduced also in the House of
Representatives, was unlikely to become law any time soon,
because Congress is deadlocked on fiscal issues, policy analysts
But it signaled renewed urgency about fixing the U.S. tax
code, last overhauled in 1986 and riddled with loopholes.
"Our current tax code unnecessarily encourages companies to
shift their tax address offshore, eroding the U.S. tax base and
endangering American jobs," said Senate Democrat Ben Cardin.
No Republicans co-sponsored the Levin bill, but leading
Republican tax law writers have said they want to combat
inversions as part of a comprehensive tax code reform.
TWO MAJOR DEALS
Both big inversions attempted recently have stumbled. One
was a merger of U.S. advertising firm Omnicom with French rival
Publicis Groupe SA. That deal collapsed.
The other was drugmaker Pfizer's pursuit of UK competitor
AstraZeneca Plc. That deal was thrown into doubt on
Monday when AstraZeneca rejected Pfizer's latest offer.
Several smaller inversions 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 crisis abated.
U.S. drugstore chain Walgreen Co has been under
pressure from some investors to do an inversion with Alliance
Boots Holdings Ltd, the Financial Times has reported.
Inversions typically involve the buyout by a U.S. company of
a foreign company and a restructuring to "reflag" the U.S. firm
for tax purposes to the foreign company's home or elsewhere.
There are some restrictions on inversions, which erode the
U.S. corporate tax base. President Barack Obama earlier this
year proposed tightening the restrictions in his 2015 budget.
Obama wants to raise the minimum level of foreign ownership
in a newly inverted holding company to 50 percent from about 20
percent, making the deals more difficult to carry out.
The Levin bill resembles Obama's proposal, but adds the
two-year moratorium. Like the Obama proposal, the Levin bill
also would block inversions if an inverted company's management
and significant business operations remained in the United
(Editing by Howard Goller and Cynthia Osterman)