AbbVie’s $55-billion bid for UK drug maker Shire was approved, providing yet another footnote in the history of corporate inversion on the part of US companies mainly looking to avoid corporate taxes. The combined firm will move to UK, saving upwards of $8 billion in US corporate taxes by some estimates.

While such a move certainly rubs policy makers the wrong way, in reality isn’t this a perfect case study of the free market economy? People and companies have moved across state lines for better opportunities, so why not cross country-borders in today’s global economy? Some compare this to individuals renouncing US citizenship to save on personal taxes; I think that’s a bad comparison. The latter is unthinkable and outrageous (I am an ex-military after all).

Cries of jingoism will not solve the problem. The only permanent solution is to change the US corporate tax laws so that we can be competitive and on a level playing field with the likes of Ireland. It’s been a couple of years since Chicago lost Aon to the UK (well-respected board members resigned in protest). We were bracing for the same after the Walgreens / Boots (UK) merger. Fortunately, Walgreens announced that they are here to stay. Every accretion and dilution model has a black box, designed to justify “positive synergy” that may or may not come to fruition. I am just trying to imagine how to build one for inversion tax savings.

 

Originally Published: SpendMatters, August 22, 2014 2:24pm
http://spendmatters.com/2014/08/22/rant-on-corporate-inversion/