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Race to Cut Taxes Fuels Urge to Merge

Discussion in 'Society and Culture' started by ethics, Jul 16, 2014.

  1. ethics

    ethics Pomp-Dumpster Staff Member

    And it's called Inversion.

    Say I have a company worth 10 billion in the US. My corporate rate is about 35% (one of the highest in the world). I can merge with a company worth 300 million in Ireland, which has a corp tax at 12.4%. Any overseas sales -- which is a huge portion of my sales -- my corporate tax on those sales would be the lower Irish rate vs. the highest in the world of 35%.

    The deals, mostly in the pharmaceutical industry but also cropping up in retail, consumer and manufacturing, have come fast and furious amid two trends: rebounding appetite for large, transformative mergers and acquisitions; and fear that the opportunity to use the cross-border tax strategy soon could disappear.
    Since the beginning of last year, 19 inversion deals have been announced, with 14 coming this year alone, according to the Congressional Research Service and recent deal announcements.
    Inversions have been popular among U.S. pharmaceutical companies because many generate substantial sales overseas that would be taxed at high U.S. rates if brought home.

    Boosting earnings from tax savings has been especially helpful for drug makers lately as they try to find growth amid pressure from the government and insurers to control costs. It also helps U.S. companies compete with foreign rivals.

    "They're getting pressure from institutional holders saying, 'Why wouldn't you do this?'" said David Maris, a BMO Capital Markets analyst.

    As far as I can tell, the bs about corporate taxes being low in the US is just that, bs. If I am a company CEO or owner, why wouldn't I want to use this loophole? The above quotes were taken just YESTERDAY from WSJ.

    Today? Oh look: Obama Administration Urges Immediate Action on 'Inversions' - WSJ
  2. SixofNine

    SixofNine Jedi Sage Staff Member

    He'll probably issue an executive order.
  3. Biker

    Biker Administrator Staff Member

    And watch the furor develop over funneling business expenses and sales to Ireland which will drive the tax rate even lower. (Remember Google and the furor caused in the UK?)
  4. ethics

    ethics Pomp-Dumpster Staff Member

  5. Biker

    Biker Administrator Staff Member

    I'm not sure this one's being done for "tax inversion". Canadian taxes are brutal in some provinces. Tim Horton's has been trying to expand from a coffee/donut shop into more of a fast food chain with little success. The merger makes sense for Tim Horton's.
  6. ethics

    ethics Pomp-Dumpster Staff Member

  7. Biker

    Biker Administrator Staff Member

    Ahh. Most of the scuttlebutt up here is whining about another "Canadian" company being bought out by a foreign company. :yellowlaugh:
    ethics likes this.
  8. Sierra Mike

    Sierra Mike The Dude Abides Staff Member

    Then they should probably talk to the Horton's shareholders and urge them not to sell to the Great Satan. ;)
  9. Allene

    Allene Registered User

    Yeah, like the GST or Grab and Snatch tax. I don't think Tim Horton's was around when I left in 1968, so I'm not sentimentally attached to it. They can do what they want.

  10. ethics

    ethics Pomp-Dumpster Staff Member

    Done deal. Headquarters to be in Canada.
  11. Biker

    Biker Administrator Staff Member

    What the Tim Hortons-Burger King deal really means | CTV News

    While they may see an immediate tax savings, they'll most likely end up paying nearly the same, especially if the headquarters is in Ontario. The liberals won the Ontario elections earlier this year which means corporate tax rates are set to climb again.
  12. ethics

    ethics Pomp-Dumpster Staff Member

    Good, fuck them. As much as I want to say, "SEE! TAXES ARE TOO DAMN HIGH IN US!" this is a US company skirting paying taxes like the rest of us.
  13. Greg

    Greg Full Member

    Corporate taxes are too high in the US. When you shock a monkey it squirms to move away from the shock. When you over-tax corporations they move their corporate headquarters to countries with lower taxes.

    I don't understand why our government hasn't figured that out yet. Maybe when the last corporation moves and corporate taxes are zero, and the US national debt reaches $50T maybe they will get an inkling.

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