- The US Treasury is reviewing possible actions it can take via various authorities to stop companies from escaping US tax obligations by moving their headquarters offshore.
- President Obama announced that new laws put in place could retroactively unravel the deals that have been struck this year, including AbbVie’s $53 billion acquisition of Shire.
- Shire’s shares were down more than 4% on the announcement that the US Treasury wanted to take steps to roll back tax-inversion deals.
If the AbbVie/Shire deal sticks, the new company will have an effective tax rate of 13% by 2016. Over the last 10 years, 47 companies have moved their tax headquarters offshore, with 12 companies currently in the process of doing the same thing, including AbbVie.
The Obama administration says that billions in taxpayer dollars are at stake in the tax-inversion debate. He is determined to reverse the trend. President Obama has been quoted as saying that companies that move their headquarters offshore are “renouncing their US citizenship” by leaving the US. What comes next is still uncertain -- but companies seeking to move their headquarters abroad will face certain scrutiny.
Recently, Walgreens announced that it would not shift its domicile after merging with UK-based Alliance Boots, largely out of fear of coming changes to laws and regulations governing tax-inversion deals.