US Economy
Up to 25 more US companies set to move overseas to cut tax bills
By Michael Hennigan, Finfacts founder and editor
Jul 23, 2014 - 8:12 AM

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Ron Wyden, Senate Finance Committee chairman, Washington DC, July 22, 2014

Up to 25 more US companies are set to move overseas to cut their tax bills this year, a Democratic senator has warned on what he termed the "virus" of tax inversions.

Ron Wyden, Senate Finance Committee chairman, at a hearing Tuesday said the Finance Committee must take decisive action to end corporate inversions - - the practice of US companies moving their headquarters abroad in pursuit of lower tax rates. Wyden also said inversions represent a clear sign that the US tax code needs comprehensive reform to keep America competitive and create good-paying jobs.

Wyden said no senior executives of inverting companies would appear at the hearing and this week Accenture, the management consultancy firm objected to Finfacts calling the firm "the US consultancy."

We have offered to replace the term "the US consultancy" with: "the former consulting arm of Arthur Andersen, the defunct US accounting firm."

Andersen Consulting was incorporated in Bermuda in 2001 and the global firm became Irish in 2009.

"None of our top executives are moving to Ireland, but that's totally irrelevant," said a company spokesman according to The Wall Street Journal in 2009 when the tax residency was moved from Bermuda to Ireland. "If it was a US corporation, how many CEOs live in Delaware?"

US-Ireland Tax Inversions 600,000+ staff: Kenny, Noonan met with top US corporate lawyers

“This wave of inversions may be good for shareholders, investment bankers and private equity firms, but they are bad for America,” Wyden said. “The Finance Committee must respond now, on a bipartisan basis, to plug the inversion loophole. America’s free enterprise system works best when there’s a level playing field, and inversions further distort the free market by bestowing tax favours on some at the expense of the American taxpayer.”

Corporate inversions have become a growing problem in recent years, with 14 completed or announced deals in 2014 alone. The Joint Committee on Taxation has estimated nearly $20bn in revenue will be lost over ten years due to inversions.

Ireland, the Netherlands, UK and Switzerland are the locations of choice for the former US companies - - most of the firms retain their management and control in the United States.

Jack Lew, Treasury secretary, last week urged Congress to pass a White House proposal to eliminate inversions by lifting the foreign ownership threshold for such deals from 20% to 50%.

Senator Orrin Hatch, the ranking Republican, said he is open to short-term measures to curb corporate inversions but doesn't support any of the proposals floated so far by Democrats.

Wyden said he hopes to see Congress take up bipartisan legislation to address the issue in the very near future. Wyden also said taking swift action to close the inversion loophole will give Congress the space needed to work on a comprehensive tax reform plan, the best step for preventing issues such as inversions from occurring in the first place.

“The American tax code is an anti-competitive mess,” Wyden said.  “Comprehensive tax reform needs to happen soon. The longer we wait, our tax base will keep eroding, cash piles overseas will continue to grow, and investment dollars will be driven overseas. After the inversion loophole is closed, this committee will pursue reform that creates a level playing field for U.S. companies and workers in the global economy. That means a fair and simple code designed to help businesses grow.”

Witnesses at Tuesday’s hearing included Robert Stack, deputy assistant secretary for international tax affairs at the Treasury Department; Pascal Saint-Amans, director of the Centre for Tax Policy and Administration at the Organisation for Economic Co-operation and Development (OECD); Mihir Desai, professor of finance at the Harvard Business School and professor of law at Harvard Law School;Peter Merrill, director of the National Economic and Statistics Group at PricewaterhouseCoopers; Leslie Robinson, associate professor of business administration at the Tuck School of Business at Dartmouth College; and Allan Sloan, the senior editor at large at Fortune magazine. Their testimony is available here.

The full text of Wyden’s statement is available here.

C-Span video

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