|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
Finfacts: US-Ireland Tax Inversions 600,000+ staff: Kenny, Noonan met with
top US corporate lawyers
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
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.
American tax code is an anti-competitive mess,”
“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
The full text of Wyden’s statement is available