Don't Drink the Tea. Think With the WE.
Integer eget dui ante, a vestibulum augue. Suspendisse lorem diam!
Aug
2014
15

Lobbyists Line Up to Protect Tax Inversion Laws While Huge Corporations Pay Zilch

Medtronic Logo Tax Evasion

submit to reddit  

Minnesota-based Medtronic, Inc. has hired a lobbying firm headed by former U.S. Senators Trent Lott and John Breaux in an attempt to defeat legislation that would undermine the company’s interest in relocating its corporate headquarters overseas, a move that would save the company billions in taxes.  

The primary bill in question is the Stop Corporate Inversion Act of 2014, co-sponsored by Minnesota Sens/ Al Franken and Amy Klobuchar, which seeks to treat companies that move abroad as U.S. companies if less than 50 percent of their ownership is foreign.  The law would be retroactive to May 8, 2014 and would force Medtronic to pay U.S. taxes, according to the Minneapolis Star-Tribune:

Public records show that Medtronic has paid a firm led by former Sens. Trent Lott and John Breaux $200,000 to discuss bills in the Senate and House that would restrict the transplantation of corporate headquarters abroad to save on U.S. taxes, known as inversion deals.

The involvement of the Breaux-Lott Leadership Group comes amid escalating controversy and public backlash over tax-advantaged corporate relocations like Medtronic’s proposed $42.9 billion acquisition of the Irish company Covidien. President Obama has called the trend unpatriotic and asked Congress to pass laws to stop it.

Norm Ornstein, a congressional expert at the American Enterprise Institute (AEI), called Medtronic’s move “ an investment of ‘minibucks’ in lobbying to save megabucks from their tax bills.” Medtronics, Inc. is seeking to purchase Covidien in a $42.9 billion deal.  Covidien is located in Ireland, a nation that many American companies exploit to avoid corporate taxes.  

To date, attempts to halt the foreign incorporation of American companies for tax purposes have stalled due to congressional gridlock.  But the problem is growing so costly that the Treasury Department is considering new regulations.  USA Today reports that 20 major American companies paid a zero percent tax rate in the second quarter.   Some of these companies are as massive as Merck, Seagate, and General Motors.  

Writer Matt Krantz describes how the profitable pharmaceutical Merck actually paid a negative tax rate last quarter:

The biggest example during the second quarter is drugmaking giant Merck. The company had a negative effective tax rate during the second quarter of 7.5%, meaning it actually got a net tax credit. That’s despite the fact that income before taxes at Merck soared 52% to $1.9 billion during the quarter.

Merck appears to be gaining on the tax front, in part, by the fact it earns profits in countries with lower tax rates. In its regulatory filing, Merck pointed to the “beneficial impact of foreign earnings” as part of the reason for the low effective tax rate. Perhaps more importantly, Merck got a tax benefit in the quarter from an option exercise connected with rival AstraZeneca buying Merck’s interest in a partnership. Financial moves connected to the deal resulted in Merck getting a one-time tax benefit.

Merck’s effective tax rate last year was much higher, 18%, since it didn’t have some of the same benefits. But Seagate has made habit out of keeping effective tax rates low. During its fiscal year ended June 27, the company had an income tax benefit of $14 million, which was double the $7 million income tax benefit of fiscal 2013, according to the company’s regulatory filing. During fiscal 2014, the company got a big tax benefit from “the reversal of a portion of the valuation allowances recorded in prior periods.” But Seagate also points out it gets a boost from the fact its parent holding company is based in low-tax country Ireland. The company paid this low tax rate despite reporting income before taxes of $1.6 billion during the quarter.

The rallying cry again tax inversion is gaining in volume. New York Senator Chuck Schumer sees the practice as a cancer that will spread quickly if it is not dealth with:

“If we don’t pass this provision it won’t be just a certain type of company that asks for inversions, but every American company would because the deduction is available to all of them,” Mr. Schumer said.

advert

No Comments on “Lobbyists Line Up to Protect Tax Inversion Laws While Huge Corporations Pay Zilch”

No one has commented on this entry yet.

Leave a Reply

*
To prove you're a person (not a spam script), type the security word shown in the picture. Click on the picture to hear an audio file of the word.
Anti-spam image