‘Unpatriotic Loophole’ Targeted by Obama Costs Taxpayers $2 Billion
By Zachary R. Mider Dec 2, 2014
U.S. companies that have already carried out inversions are likely to cost the government a record $2.2 billion or more in lost tax revenue next year, double the amount in 2014, according to calculations based on companies’ financial results.
That doesn’t include the impact of companies that shift their legal addresses abroad in the future, which one Congressional study pegged at about $2 billion a year over the next decade. Since the first inversion in 1982, the deals have cost more than $9.8 billion in inflation-adjusted dollars, the calculations based on data compiled by Bloomberg show.
In an era when tax rates paid by U.S. companies overall have declined, those that inverted reduced their taxes far more than competitors did. They were able to lower their effective tax rates between 6.6 and 17.4 percentage points more than peers that didn’t take a foreign address, the calculations show.
The data highlight how the U.S. government is paying the price for inversions it allowed to happen years or decades earlier. Even if Congress or President Barack Obama, who has called inversions an “unpatriotic tax loophole,” were to stop them today, the erosion of the tax base by past deals will continue to accelerate.
Many inverted companies are using their tax edge to out-compete U.S. rivals or buy them. Actavis Plc, a drugmaker with roots in New Jersey and California, took a legal address in tax-friendly Ireland last year. Since then, it has struck deals to acquire four U.S. competitors and slash their tax bills by hundreds of millions of dollars.
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‘Unpatriotic Loophole’ Targeted by Obama Costs Taxpayers $2 Billion - Bloomberg
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