(Updates with quotes, background on Walgreen)
By Jeff Mason
LOS ANGELES, July 24 U.S. President Barack Obama
on Thursday hammered U.S. companies that avoid federal taxes by
shifting their tax domiciles overseas in deals known as
"inversions" and called on Congress to pass a bill to curb the
During remarks to a rowdy crowd at the Los Angeles Technical
College, Obama promoted what he called "economic patriotism" and
made clear he believed the companies that were engaging in such
practices were not being patriotic. The president was in
California on a three-day fund-raising swing for Democrats.
So-called inversion deals occur when a U.S. company acquires
or sets up a foreign company, then moves its U.S. tax domicile
to the foreign company and its lower-tax home country.
Nine inversion deals have been reached this year by
companies ranging from banana distributor Chiquita Brands
International Inc to drugmaker AbbVie Inc, and
more are under consideration.
The transactions are setting a record pace since the first
inversion was carried out 32 years ago.
"Even as corporate profits are higher than ever, there's a
small but growing group of big corporations that are fleeing the
country to get out of paying taxes," Obama said.
"They're technically renouncing their U.S. citizenship,
they're declaring their base someplace else even though most of
their operations are here. You know some people are calling
these companies 'corporate deserters.'"
Obama said he did not begrudge companies making profits but
said corporate tax evasion practices made it harder for the
middle class - his target political constituency - to succeed.
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.
Obama threw his weight behind the Democratic bills, calling
for a rule change that would deem any company with half of its
business in the United States to be U.S.-domiciled.
The proposed changes, already put forward in the president's
annual budget, would be retroactive to May 2014 and implemented
independently of moves to achieve broader tax reform.
Republicans prefer a change to inversions to be part of an
effort to reform the U.S. tax code.
"Under President Obama, the United States has the highest
corporate tax rate in the developed world. It doesn't have to be
that way: Comprehensive tax reform would reduce deductions and
lower tax rates for everyone," said Michael Steel, spokesman for
the Republican speaker of the House of Representatives, John
The White House supports broad tax reform but argues that
action on inversions should not wait.
"We need to stop companies from renouncing their citizenship
just to get out of paying their fair share of taxes," Obama
said. "We can't wait for that. You shouldn't get to call
yourself an American company only when you want a handout from
The issue is a prominent one in Obama's home state of
Illinois. Walgreen Co, the largest U.S. drugstore chain, is
considering moving its tax home base abroad with such a deal.
Protesters in Chicago went to the company's flagship store on
Thursday to rally against its plans.
(Additional reporting by Kevin Drawbaugh in Washington and
Fiona Ortiz in Chicago; Editing by Jonathan Oatis and Michael