Treasury Secretary Jacob Lew told both House and Senate leaders in a letter that such deals, known as inversions, “hollow out the U.S. corporate income tax base,” and Congress should immediately enact legislation retroactive to May that stops the practice.
“We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes,” Lew said in the letter dated Tuesday.
A total of 47 U.S.-based companies have combined with foreign businesses over the past decade in inversions, according to the Congressional Research Service. Several more are planning or considering the move, including Walgreen Co., which runs the nation’s largest drugstore chain.
Inversions enable U.S.-based, multinational companies to lower their tax bills in part by combining with a foreign company and reorganizing in a country with a lower tax rate. At 35 percent, the United States has the highest corporate income tax rate in the industrialized world, and it also taxes income earned overseas and then brought home.
US tax policies are sabotaging its global economic competitiveness. Fortunately there is an escape hatch. More on that here.