A group of 14 senators introduced
a bill on Tuesday that would effectively place a two-year moratorium on
so-called inversions, halting the rush by United States corporations to
reincorporate overseas to lower their tax bills.
The Stop Corporate Inversions Act of 2014 would essentially
disallow any more inversions for two years, giving Congress time to pursue
broad changes in the corporate tax code. Such an overhaul could make the United
States rates more competitive with other countries, possibly reducing the
incentive for companies to move overseas for lower taxes.
“Our current tax code unnecessarily encourages companies to
shift their tax address offshore, eroding the U.S. tax base and endangering
American jobs,” said Senator Ben Cardin, Democrat of Maryland and a member of
the Senate Finance Committee. “In the longer term, I look forward to redoubling
our efforts on broader tax reform legislation that can fix our corporate tax
code and make it more competitive.”
Dozens of companies have moved
overseas in recent years through inversions — takeovers of smaller
international rivals that allow them to reincorporate in countries like
Ireland, Britain and the Netherlands. Pfizer, the big drug maker based in New
York, had been attempting an
inversion by acquiring AstraZeneca, but its offers have been rebuffed and it
said it would not pursue a hostile deal. Many of the inversions have been done
by health care companies. But technology companies, including Applied
Materials, and even the banana producer Chiquita have also struck deals that
allowed them to move overseas, at least for tax purposes.
Though companies argue that such moves are necessary to keep
them competitive with global rivals that pay lower tax rates, many lawmakers in
Washington think they are taking advantage of a loophole that allows them to
skirt paying their fair share.
“These transactions are about tax avoidance, plain and simple,”
said Senator Carl Levin, Democrat of Michigan and chairman of the Senate
Permanent Subcommittee on Investigations, who is the bill’s lead sponsor. “The
Treasury is bleeding red ink, and we can’t wait for comprehensive tax reform to
stop the bleeding. Our legislation would clamp down on this loophole to prevent
corporations from shifting their tax burden onto their competitors and average
Americans while Congress is considering comprehensive tax reform.”
Under current law, companies can move overseas if foreign
shareholders own 20 percent or more of their stock. The most common way United
States companies achieve that is by acquiring a foreign rival. The bill would
increase that threshold to 50 percent for two years.
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