The American corporations labeled unpatriotic for exploiting loopholes to avoid US taxes may see the so-called tax inversion schemes much less lucrative with the new rules announced by the US Treasury to crack down on the practice.
A number of US corporations were labeled “unpatriotic” for engaging in tax inversion, where an American company buys up a foreign one and then moves their headquarters to the host country to take advantage of the lower corporate tax rates.
America’s corporate tax rate is 35 percent, while countries such as the UK enjoy a rate of 20 percent and Ireland a rate of 12 percent. Lower corporate taxes are believed to be the reason why, earlier this year, Pfizer was trying to buy Britain’s Astra Zeneca and move its headquarters to the UK. The deal fell through because an agreement couldn’t be reached on a price, but estimates are that without rule changes the US could lose $19.5 billion in tax revenue over ten years through inversion, according to the Congressional Joint Committee on Taxation.
“Today, in an important first step, the Treasury is announcing targeted action to meaningfully reduce the economic benefits of corporate inversions, and when possible, stop them altogether,” US Treasury Secretary Jack Lew, said in a statement on Monday.
Posted by The NON-Conformist