Senate Finance Committee To Address Inversions At Hearing
This article was originally published in The Pink Sheet Daily
Executive Summary
Committee Chairman Wyden is seeking both near-term and longer-term solutions.
The Senate Finance Committee will take up the issue of corporate tax inversions at a hearing on reforming the U.S. tax code scheduled for July 22, according to a committee spokesperson. Committee Chairman Ron Wyden, D-Ore., is seeking a way to stem the tide of inversions, in which U.S. companies lower corporate taxes by moving their tax domicile abroad through the acquisition of a foreign business.
Inversions are proliferating in the pharmaceutical industry. AbbVie Inc.’s planned purchase of Shire PLC for $54 billion would constitute the largest inversion deal yet and enable the U.S. company to reincorporate in the U.K. (see related story). Mylan Laboratories Ltd. plans to acquire the international generics drug business of Abbott Laboratories Inc. and reincorporate in the Netherlands (Also see "Mylan Makes Its Move, Buys Abbott Generics In Tax Inversion Strategy" - Pink Sheet, 14 Jul, 2014.).Those deals followed Pfizer Inc.’s thwarted efforts to buy AstraZeneca PLC, which would have enabled the U.S. pharma to transfer its tax domicile to the U.K. (Also see "AstraZeneca Gets A Reprieve But Will Have To Earn Its Independence" - Pink Sheet, 26 May, 2014.).
In a July 16 statement on the trend, Wyden said: “This inversion loophole must be plugged. As the speed of inversions increases, this will only fuel bipartisan urgency to stop companies from deserting the U.S. I’m talking with my colleagues and exploring options for addressing this in the near and long term.”
Witnesses at the upcoming hearing will include U.S. Treasury Department Deputy Assistant Secretary for International Tax Affairs Robert Stack and Organisation for Economic Cooperation and Development Center for Tax Policy and Administration Director Pascal Saint-Amans.
Also scheduled to testify are Harvard finance and law professor Mihir Desai, Dartmouth business school professor Leslie Robinson, PricewaterhouseCoopers National Economics and Statistics Group Director Peter Merrill and Fortune magazine Senior Editor-at-Large Allan Sloan.
Legislation to block inversions has been introduced in the Senate by Carl Levin, D-Mich., and in the House by a group of Democrats including Ways and Means Committee ranking member Sander Levin, D-Mich., and Budget Committee Ranking member Chris Van Hollen, D-Md. The president’s 2015 budget proposal also includes a provision to tighten restrictions on corporate inversions.
The administration reiterated its opposition to inversions in a July 15 letter to congressional leaders, urging support for legislative reform. Treasury Secretary Jacob Lew stated that “the best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes, and simplifies the tax system. But even as we work to do that, we should prevent companies from effectively renouncing their citizenship to get out of paying taxes.”
The letter was sent to House Ways and Means Chair Dave Camp, R-Mich., and Sens. Levin, Wyden and Orrin Hatch, R-Utah, who is the ranking member on the Finance Committee. Republicans have not supported current bills to restrict inversions, pointing instead to the need for broader corporate tax reform.