FOR IMMEDIATE RELEASE
July 3, 2014
Tax Loopholes Lure American Companies to Renounce American Citizenship
Reminder on Nation’s Birthday of a Wave of Inversions
As the nation pauses to mark its birthday with celebrations and fireworks displaying pride in country and patriotism, the FACT (Financial Accountability and Corporate Transparency) Coalition is marking the day by expressing its view on tax loopholes that are encouraging quintessentially American companies to renounce their citizenship when it comes to paying taxes.
Several large American corporations have recently announced bids to “invert,” a process by which they claim to be a foreign corporation on paper in order to avoid paying U.S. taxes. A loophole in the tax laws allows this to happen when an American corporation merges with a foreign corporation. In theory, profits earned by the newly merged company in the U.S. would still be subject to U.S. taxes, but corporate inversions are usually followed by additional tax avoidance practices to make U.S. profits appear to be earned abroad and thus not subject to U.S. taxes.
It’s important to note that inversions can involve no substantive changes at all and still result in a greatly reduced tax bill. For example, it was disclosed during the proposed merger of Pfizer and AstraZeneca that the management of the merged company would remain in the U.S. and operations currently in the U.S. would not be moved abroad. Similarly, Walgreen’s would continue to be the largest drug store chain in the United States, even if it were to “relocate” to Switzerland.
In other words, these firms are only moving “overseas” on paper, in an effort to avoid U.S. taxes.
“How great would it be for Congress to mark the Fourth of July by closing these loopholes and sending the message that like everyone else, large multinationals have to pay for the privileges and protections that make America a great place to do business,” said Nicole Tichon, FACT Coalition Executive Director.
Founded in 2011, the Financial Accountability and Corporate Transparency (FACT) Coalition unites civil society representatives from small business, labor, government watchdog, faith-based, human rights, anti-corruption, public-interest, and international development organizations. We seek an honest and fair corporate tax code, greater transparency in corporate ownership and operations, and commonsense policies to combat the facilitation of money laundering and other criminal activity by the legitimate financial system.