Biggest tax inverters ‘have $21bn offshore’
Three US companies seeking to use controversial takeovers to cut their US tax bills hold at least $21bn in “trapped” offshore cash that the deals could unlock.
According to data compiled by Moody’s for the Financial Times, the biggest offshore cash piles held by companies pursuing so-called “tax inversions” belong to Medtronic, a medical devices group; AbbVie, a drugmaker; and Applied Materials, a technology group.
The deals enable US companies to shift their tax domicile to a country with lower tax rates by acquiring a foreign rival. The tax benefits include lower-cost access to existing offshore cash and to future non-US earnings.
Thirteen inversion deals worth $178bn have been announced since the start of 2013, according to Dealogic. Nine other companies doing inversions do not disclose their offshore cash while Mylan holds just $174m outside the US.
The deals have sparked political outrage, with President Barack Obama describing the companies as “deserters” that are “renouncing their US citizenship”.
Attacks on inversions will ramp up again this week as lawmakers return to Washington and the Democrats seek to make them a campaign issue ahead of midterm elections on November 4.
Inversions allow companies to move cash more freely between overseas subsidiaries and their new foreign parents while bypassing US tax collectors.
The US Treasury is exploring ways to use executive action to curb the deals in the absence of legislation from Congress.
Source: ft
