A few weeks ago, we posted on an article in the
Paul Krugman explains the notion and why Congress needs to act:
The most important thing to understand about inversion is that it does not in any meaningful sense involve American business “moving overseas.” Consider the case of Walgreen, the giant drugstore chain that, according to multiple reports, is on the verge of making itself legally Swiss. If the plan goes through, nothing about the business will change; your local pharmacy won’t close and reopen in Zurich. It will be a purely paper transaction — but it will deprive the U.S. government of several billion dollars in revenue that you, the taxpayer, will have to make up one way or another. [snip]
And Congress could crack down on this tax dodge — it’s already illegal for a company to claim that its legal domicile is someplace where it has little real business, and tightening the criteria for declaring a company non-American could block many of the inversions now taking place. So is there any reason not to stop this gratuitous loss of revenue? No.Treasury Secretary Jacob Lew describes the President's proposal to plug the inversion loophole:
The president’s proposal applies a common-sense approach to determine whether a corporation has truly switched its base of operations to another country — a company would not be able to move outside the United States for tax purposes if it is still managed and controlled in the United States, does a significant amount of its business here and does not do a significant amount of its business in the country it claims as its new home.
The president’s plan also would eliminate the incentives a U.S. corporation has to acquire a foreign company and use its foreign address to claim tax status beyond our borders. To make sure the merged company is not merely masquerading as a non-U.S. company, shareholders of the foreign company would have to own at least 50 percent of the newly merged company — the current legal standard requires only 20 percent.While the Senate is holding hearings on the subject, there's no consensus on how to proceed. Inverters want to slow-walk this past the November elections when they hope there will be a more favorable (=cough= Rethuglican =cough=) climate in the Senate. Frankly, there appears to be even less appetite in the