Sunday, July 20, 2014

US companies sit at a crossroads on tax inversions

CNBC reports:

U.S. Treasury Secretary Jack Lew earlier this week railed against U.S.-based companies that attempt to avoid domestic taxes by re-incorporating overseas through acquisitions, calling out their lack of "economic patriotism." Pharmaceuticals company Mylan and drug chain Walgreen sparked the debate on what's known as corporate inversions when both announced their intention to buy foreign companies for the tax benefits.

Lew's comments once again drew out the decision American companies face—stay domestic and pay American tax rates or go elsewhere for savings.

Center on Budget and Policy Priorities senior fellow Jared Bernstein thinks Lew has a point.

"It does strike one as economically unpatriotic to invert in order to lower your tax bill. Though again, they're essentially following a set of incentives that kind of point them in that direction," Bernstein said. "This is one result of globalization and a pretty messed up corporate tax code."
Taxes do have consequences.