The Obama administration called for immediate congressional action to stop U.S. companies from using cross-border mergers to escape the country’s tax system, the latest trend in corporate deal-making.
In a letter calling for a “new sense of economic patriotism,” Treasury Secretary Jacob Lew said Congress should approve tax changes retroactive to May.
“We should prevent companies from effectively renouncing their citizenship to get out of paying taxes,” Lew wrote in the letter to top congressional tax writers, which was dated Tuesday and obtained by Bloomberg News. “We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes.”
|U.S. Treasury Secretary Jacob Lew. (Bloomberg)|
The mergers used to legally avoid taxes, known as inversion transactions, have become increasingly popular over the past year, particularly in the pharmaceutical industry. Companies such as Minneapolis-based Medtronic Inc. and Canonsburg, Pennsylvania-based Mylan Inc. have announced their intention to move their legal addresses outside the U.S. Pfizer Inc., based in New York, attempted to move its tax address to the U.K. by purchasing London-based AstraZeneca Plc. (Bloomberg)
Lew’s letter may not be enough to prompt Congress to move quickly.
Congressional Democrats, including Representative Sander Levin and Senator Carl Levin of Michigan, have already introduced bills that echo the administration’s approach. Those measures haven’t advanced because of Republicans’ insistence that any changes be made as part of a broader revamp of the tax code that isn’t likely to happen until 2015 at the earliest. (Bloomberg)