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How Do We Stop Tax Inversions? (Viewed 1961 times)
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Posts: 195
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How Do We Stop Tax Inversions?
Posted on September 16, 2014

This topic is focused on solutions to reduce or eliminate tax inversions.

What is an inversion?

It's when a company acquires a business in another country, then relocates its headquarters there. It cuts costs and saves on paying U.S. taxes. They become a foreign company.

For example: Walgreens announced a plan to complete an acquisition of Europe-based Alliance Boots. The plan was to “invert” the structure and shift its headquarters overseas to escape paying high U.S. and state corporate taxes.  However, Walgreens faced a stiff backlash from consumers and didn't follow thru on the inversion.

However, it's not stopping many other companies.

President Barack Obama and Congress have criticized inversions because they mean a loss of tax revenue for the U.S. government.

Amusingly, they've done nothing to prevent more companies from following thru on inversions.

It's been workers, consumers and customers (you and I) voicing our discontent and threatening to boycott these companies.

What more can we do? What ideas and solutions do you have to halt inversions?

Founder of USelections.com
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Posts: 195
Rating: 7
Re: How Do We Stop Tax Inversions?
Reply #1 Posted on April 04, 2016

Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping

https://www.treasury.gov/press-center/press-releases/Pages/jl0405.aspx

"The U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued temporary and proposed regulations to further reduce the benefits of and limit the number of corporate tax inversions, including by addressing earnings stripping. By undertaking an inversion transaction, companies move their tax residence overseas to avoid U.S. taxes without making significant changes in their business operations. After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States, while shifting a greater tax burden to other businesses and American families."

"Today, Treasury is taking action to:

  • Limit inversions by disregarding foreign parent stock attributable to recent inversions or acquisitions of U.S. companies. This will prevent a foreign company (including a recent inverter) that acquires multiple American companies in stock-based transactions from using the resulting increase in size to avoid the current inversion thresholds for a subsequent U.S. acquisition. 
  •  Address earnings stripping by:

    1.  Targeting transactions that generate large interest deductions by simply increasing related-party debt without financing new investment in the United States.
       
    2.  Allowing the IRS on audit to divide debt instruments into part debt and part equity, rather than the current system that generally treats them as wholly one or the other.
       
    3.  Facilitating improved due diligence and compliance by requiring certain large corporations to do up-front due diligence and documentation with respect to the characterization of related-party financial instruments as debt.  If these requirements are not met, instruments will be treated as equity for tax purposes.

Additionally, "the best way to address inversions is to reform our business tax system, which is why Treasury is releasing an updated framework on business tax reform, outlining the administration’s proposals to date as a guide for future reform."

[ read the full press release

Founder of USelections.com

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