New US call for action on tax-avoidance mechanism
DEMOCRATIC senators in Washington have said they are considering legislation to prevent corporate inversions, an increasingly popular transaction that involves US companies reincorporating in Ireland and other countries to avoid US taxes.
Senate Finance Committee chairman Ron Wyden, a Democrat, said he wanted to make it harder for US companies to move their headquarters abroad to lower their taxes for inversion deals from this week.
"I don't approach retroactivity in legislation lightly, but corporations must understand that they won't profit from abandoning the US," Mr Wyden said in a 'Wall Street Journal' editorial published yesterday.
He wants to increase to 50pc from 20pc the amount of stock a foreign company must own in a US company for an inversion deal to legally take place.
Additionally, Mr Wyden called for comprehensive tax reform as a way to make the US more business-friendly.
Earlier this week, Democratic Senator Carl Levin, a long-time advocate for closing corporate tax loopholes, said he was also talking with senators about potential legislation. Mr Levin angered the Irish Government last summer when he described Ireland as a tax haven.
"It has become increasingly clear that a loophole in our tax laws allowing these inversions threatens to devastate federal tax receipts. We have to close that loophole," said Mr Levin.
He is the chairman of the Senate Permanent Subcommittee on Investigations, which has held hearings to shed light on US companies' legal efforts to avoid US taxes.
A recent bid from drug-maker Pfizer to acquire British rival AstraZeneca brought renewed attention on corporate inversions. This would allow US-based Pfizer to re-domicile in Britain to take advantage of a significantly lower corporate tax rate there.
In April, days after the potential Pfizer deal was made public, the Obama administration said it was seeking ways to curb inversions.