Financial Transparency Coalition

This week the Treasury Department began assembling administrative options for deterring or preventing U.S. companies from inverting—or reorganizing overseas to avoid paying federal taxes. This move follows on the heels of a strong statement from President Obama who accused inverting firms of "cherry-picking the rules.” As he put it: "My attitude is I don't care if it's legal, it's wrong.” Particularly common among pharmaceutical and life-sciences companies, inversions are primarily a means for U.S. companies to avoid corporate taxes. In an inversion, a smaller foreign company “acquires” a large U.S. firm, allowing the domestic firm to...

It all started last month when Walgreens, the iconic American pharmacy chain, announced that it would move its headquarters to Switzerland as part of a merger with the European chain Alliance Boots. The move, known as an “inversion”, essentially involves a company merging with another company that is based in a jurisdiction with lower taxes. Once they merge, the newly formed group will usually move its headquarters to the lower tax jurisdiction to avoid paying taxes in their home country. However, this move is usually a pure technicality, meaning that while the...