Inversion Mergers

[kalm]

This has to be good for America and the free market, right? I mean it sounds bad, but no laws are being broken and there's no way to fix it. Besides, corporations are people, if they want to renounce citizenship, it' their right…

Banks Cash In on Mergers Intended to Elude Taxes


DealBook Column
Jamie Dimon, the chief executive of JPMorgan Chase, recently said, “I love America.” Lloyd Blankfein, the chief executive of Goldman Sachs, wrote an opinion article saying, “Investing in America still produces the best return.”

Yet guess who’s behind the recent spate of merger deals in which major United States corporations have renounced their citizenship in search of a lower tax bill? Wall Street banks, led by JPMorgan Chase and Goldman Sachs.

Investment banks are estimated to have collected, or will soon collect, nearly $1 billion in fees over the last three years advising and persuading American companies to move the address of their headquarters abroad (without actually moving). With seven- and eight-figure fees up for grabs, Wall Street bankers — and lawyers, consultants and accountants — have been promoting such deals, known as inversions, to some of the biggest companies in the country, including the American drug giant Pfizer.

Just last week, President Obama criticized these types of transactions, calling the companies engaged in them “corporate deserters.” “My attitude,” he said, “is I don’t care if it’s legal. It’s wrong.” He has suggested legislation, and Senator Carl Levin, the Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations, has proposed to make it more difficult for an American company to renounce its citizenship — and tax bill — by merging with a smaller foreign competitor.

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[Ivytalk]

If the corporate income tax rate -- currently the highest in the world -- is cut to a more competitive level, the "inversion" problem will take care of itself.

Thank you, Jack Lew.

[LeadBolt]

If the corporate income tax rate -- currently the highest in the world -- is cut to a more competitive level, the "inversion" problem will take care of itself.

Thank you, Jack Lew.

This. More competitive corporate tax rates will generate more tax revenues than higher corporate tax rates. Somewhere 25-30% would stem the off shore flow. At this point we don't need to match the lowest rates, but the longer we delay, the more cuts will need to be to stem inversions.

Double taxation of repatriation of foreign profits can potentially lead to American firms being bought by international firms, and a further diminishment of corporate taxes in the US. This is a long term loser.

[kalm]

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

[LeadBolt]

"At 35%, the United States has the highest nominal top corporate tax rate in any of the world's developed economies.[1] However, the average corporate tax rate in 2011 dipped to 12.1%, its lowest level since before World War I, largely due to the great recession and a bonus depreciation tax break.[2]" - Wikipedia

I was speaking of the marginal tax rate. Depending on a recession and temporary tax manipulations such as bonus depreciation, which has already expired to make the tax rates competitive is not really the way to generate long term prosperity.

I don't really think that the timing of companies beginning to execute inversions as the bonus depreciation expired and the economy improved is a co-incidence.

Closing loop holes and lowering rates is better policy than temporary tax manipulations such as bonus depreciation. I agree that we don't have to be the most competitive, but being the least competitive except for recession because of progressive tax rates and temporary tax manipulations is a short term fix to a long term condition.

[Pwns]

Closing loop holes and lowering rates is better policy than temporary tax manipulations such as bonus depreciation.

What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

[LeadBolt]

Closing loop holes and lowering rates is better policy than temporary tax manipulations such as bonus depreciation.

What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

[AZGrizFan]

What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

No way. No how.

[CID1990]

What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

never underestimate the power of just a little smidgeon of economic populism on the masses

[Baldy]

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

Here we go again...

Yes, and how many hundreds of billions of dollars does it cost, and how many billions of man hours does it take for these evil corporations to become tax compliant?

[Ibanez]

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

No way. No how.

All I remember is " broaden the base" and ""binders full of women".

[AZGrizFan]

No way. No how.

All I remember is " broaden the base" and ""binders full of women".

And who says donk advertising doesn't work.

[Ivytalk]

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

[houndawg]

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

Sometimes life isn't fair.

[OL FU]

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

Sometimes life isn't fair.

Exactly, throw out the loopholes and lower the rates and then at least it would be more fair

[kalm]

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

Here we go again...

Yes, and how many hundreds of billions of dollars does it cost, and how many billions of man hours does it take for these evil corporations to become tax compliant?

Hundreds of billions?

None the less, I'd love to see a simplified code as well.

[kalm]

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

[Ivytalk]

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

There's already a statute on the books that limits the ability of "inverted" firms to leverage themselves by replacing equity of the US firm with intercompany loans from the foreign merger partner, allowing deductibility of the interest expense on that contrived debt to reduce the firm's overall tax liability. Enforcing those laws might be a start, but the real solution is to overhaul the corporate tax code.

[AZGrizFan]

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

That's $1.863 TRILLION dollars....which is, indeed, hundreds and hundreds of billions.

[kalm]

By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

That's $1.863 TRILLION dollars....which is, indeed, hundreds and hundreds of billions.

Is that all regulatory costs or just tax code compliance?

[AZGrizFan]

According to the National Taxpayer Advocate, there were 4,428 changes to the Internal Revenue Code between 2001 and 2010, including an estimated 579 changes in 2010 alone. The tax code averages more than one change per day. The resulting complexity creates hidden compliance costs between $215 billion and $987 billion annually. To put this in perspective, total revenue collected by the federal government in 2012 was $2.5 trillion.

I know of no business that tracks TAX CODE compliance costs separately.

[houndawg]

You'd think they would if they're so large.

[houndawg]

What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

Could be.... certainly Romney care was a big hit with his constituents..

[OL FU]

I admit I take a rather simplistic view of things I admit that I draw conclusions based on the simplest approach to an issue. So tell me where I have this wrong.

If US companies are becoming foreign companies in order to lower their US taxes, the conclusion seems to be that multi-national foreign companies who do business in the US must have a competitive advantage with respect to the US tax code. It seems to me that the easiest approach would be to eliminate that competitive advantage.

OK, where am I wrong?

[dbackjon]

So you have Walgreens, which gets a quarter of it's revenue directly from Medicare/Medicaid thinking about doing this.

If they do, all my prescriptions will be pulled from Walgreens. And I will support legislation that bans Medicare/Medicaid payments to non-US owned/HQ'd companies.


You make your profit off my taxes. Pay your US taxes.