Updated, 10:28 a.m. |
The Obama administration has urged congressional leaders to take swift action to halt the rush of United States companies moving abroad.
In letters sent to four lawmakers, Treasury Secretary Jacob J. Lew said the administration supported a quick fix that would halt the trend of so-called inversions, in which United States companies buy a smaller competitor and reincorporate overseas to save money on taxes.
Speaking at the CNBC Delivering Alpha conference on Wednesday, Mr. Lew called for legislation that would include a package of business reforms, one of which would bring tax levels of companies in the 20 percent range.
“The best way to deal with this is through comprehensive business tax reform and we have a plan out there that would accomplish multiple goals,” he said, citing business tax reforms and providing resources for infrastructure investments.
Members of the House and Senate have made proposals to curb the inversion trend in recent months, and the president included a provision in the budget he presented to Congress this year that would have effectively banned the move. But none of these efforts have yet gained traction.
Now, with the pace of inversions – and the size of companies moving abroad – increasing, the administration is urging Congress to act fast. Mr. Lew sent the letter to Representative Dave Camp, Republican of Michigan and the chairman of the House Ways and Means Committee; Representative Sander Levin, Democrat of Michigan, the ranking member; Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee; and Senator Orrin G. Hatch, Republican of Utah, the ranking member.
“Short of undertaking a comprehensive reform of the business tax system, there are concrete steps that Congress can take now that would address this urgent issue,” Mr. Lew wrote.
The Treasury secretary suggested that Congress enact legislation – effective immediately and retroactive to May – to halt inversions.
Making any new legislation retroactive through May could disrupt several megadeals that have already been struck.
Since May, Minneapolis-based Medtronic agreed to acquire Covidien for $43 billion, and Pittsburgh-based Mylan agreed to acquire assets from Abbott Laboratories. Both companies plan to reincorporate in Europe as part of the deals. AbbVie, based in Chicago, won preliminary approval on Monday from the Irish drug maker Shire for a $53 billion deal that would be the biggest of the year.
But if congressional leaders act, these deals could be in jeopardy. Many of the recent inversion deals include clauses that would allow the buyer to back out of the deal if the laws change to prevent them from reincorporating abroad.
The administration appears to believe that potentially scuttling these deals would be worth pushing through immediate changes to stop inversions.
“The firms involved in these transactions still expect to benefit from their business location in the United States, with our protection of intellectual property rights, our support of research and development our investment climate, and our infrastructure, all funded by various levels of government,” the letter said. “But these firms are attempting to avoid paying taxes here, notwithstanding the benefits they gain from being located in the United States.”
The Obama administration has urged congressional leaders to take swift action to halt the rush of United States companies moving abroad.
In letters sent to four lawmakers, Treasury Secretary Jacob J. Lew said the administration supported a quick fix that would halt the trend of so-called inversions, in which United States companies buy a smaller competitor and reincorporate overseas to save money on taxes.
Speaking at the CNBC Delivering Alpha conference on Wednesday, Mr. Lew called for legislation that would include a package of business reforms, one of which would bring tax levels of companies in the 20 percent range.
“The best way to deal with this is through comprehensive business tax reform and we have a plan out there that would accomplish multiple goals,” he said, citing business tax reforms and providing resources for infrastructure investments.
Members of the House and Senate have made proposals to curb the inversion trend in recent months, and the president included a provision in the budget he presented to Congress this year that would have effectively banned the move. But none of these efforts have yet gained traction.
Now, with the pace of inversions – and the size of companies moving abroad – increasing, the administration is urging Congress to act fast. Mr. Lew sent the letter to Representative Dave Camp, Republican of Michigan and the chairman of the House Ways and Means Committee; Representative Sander Levin, Democrat of Michigan, the ranking member; Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee; and Senator Orrin G. Hatch, Republican of Utah, the ranking member.
“Short of undertaking a comprehensive reform of the business tax system, there are concrete steps that Congress can take now that would address this urgent issue,” Mr. Lew wrote.
The Treasury secretary suggested that Congress enact legislation – effective immediately and retroactive to May – to halt inversions.
Making any new legislation retroactive through May could disrupt several megadeals that have already been struck.
Since May, Minneapolis-based Medtronic agreed to acquire Covidien for $43 billion, and Pittsburgh-based Mylan agreed to acquire assets from Abbott Laboratories. Both companies plan to reincorporate in Europe as part of the deals. AbbVie, based in Chicago, won preliminary approval on Monday from the Irish drug maker Shire for a $53 billion deal that would be the biggest of the year.
But if congressional leaders act, these deals could be in jeopardy. Many of the recent inversion deals include clauses that would allow the buyer to back out of the deal if the laws change to prevent them from reincorporating abroad.
The administration appears to believe that potentially scuttling these deals would be worth pushing through immediate changes to stop inversions.
“The firms involved in these transactions still expect to benefit from their business location in the United States, with our protection of intellectual property rights, our support of research and development our investment climate, and our infrastructure, all funded by various levels of government,” the letter said. “But these firms are attempting to avoid paying taxes here, notwithstanding the benefits they gain from being located in the United States.”