Tax inversion rules affect stocks
The Obama administration’s tougher rules on offshore corporate inversions had an immediate effect Tuesday, pushing down the stock prices of companies considering such moves.
But the highly technical changes to the tax code did not appear to go far enough to derail the controversial deals, in which U.S. companies avoid higher tax rates by buying smaller foreign firms and moving their headquarters abroad.
“It changes the economics of the deals, but it does not seem to rise to the level of where you have made them un-economical,” said Edward Mills, a policy analyst with FBR Capital Markets.
The declines were part of a broader market slide after U.S. airstrikes in Syria and poor economic news from Europe. The Dow Jones industrial average fell 116.81 points, or about 0.7%, to 17,055.87. The S&P 500 index lost 11.52 points, or 0.6%, to 1,982.77, and the Nasdaq composite index was off 19 points, or about 0.4%, to 4508.69.
Burger King shares dropped about 2.7%, Medtronic was off 2.9% and Covidien fell about 2.5%. Tim Hortons was down only slightly. Shares in British pharmaceutical company AstraZeneca were down about 5%.
“There are still benefits to be had from inverting,” said Ryan Dudley, an international tax expert at accounting and advising firm Friedman. “It’s just a question of whether they now outweigh the costs.”
“The question is whether Treasury is still leaving enough tax benefits on the table for U.S. companies to invert,” Rosenthal said. “It’s really hard to say.”
Source: latimes-Tax inversion rules affect stocks
