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Monday, 30 June 2014 05:37

Unpatriotic US Corporations Increasingly Move Headquarters Overseas to Decrease Taxes

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MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT

walgreenArt Deco Walgreen Company Store in New Orleans. (Photo: Your Pal Dave)

MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT

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As July 4 nears, you'll see the unusual onslaught of corporations trying to improve their brand image by associating themselves with patriotic advertising. It is important, however, to remember this June 29 Chicago Tribune headline when you see corporations go all red, white and blue: "Walgreen [Company] considers headquarters move: Is tax loophole unpatriotic?": 

The nation's largest drugstore chain is considering a move that would allow it to significantly cut its tax bill and increase profits. But it's being painted by critics as un-American for looking to make money for shareholders through financial engineering at the expense of the communities that it grew up in. Walgreen is considering a so-called corporate tax inversion, in which an American company is able to incorporate abroad by acquiring a foreign company. The buyer, in effect, becomes a subsidiary of a foreign parent. 

Walgreen would accomplish an inversion by completing its purchase, which is expected to happen in early 2015, of Switzerland-based Alliance Boots and moving its corporate home to Europe's largest pharmacy chain. 

The Deerfield-based company faces a tough choice, one in which it must balance profits with corporate social responsibility. By going ahead with an inversion, Walgreen would give ammunition to critics who claim the company is essentially renouncing its U.S. citizenship.

As the Tribune article makes clear, the hit to US taxpayers from the Walgreen Company alone would be significant:

In an inversion, Walgreen would still pay U.S. income taxes but much less than the approximately 37 percent effective tax rate (including state and local taxes) it now pays for its U.S.-based business, corporate tax experts said. One stock analyst estimated that a Walgreen inversion would cost U.S. taxpayers $2.35 billion in the first three years after the transaction.

According to the Tribune, "Walgreen joins a small but growing number of U.S. multinationals contemplating inversions to lower their tax burden." The Tribune includes a chart of businesses that have moved their headquarters to other countries for tax avoidance purposes (on the second page of the Internet article) - and it is a legal net revenue increasing strategy. It is also noted that "fresh waves of companies have moved or are considering moving to avoid taxes."

An associate professor at Northwestern University, as quoted in the Tribune article, provides some perspective for the 99%: 

The average person who pays taxes cannot take advantage of the tax loopholes exploited by corporations, and they don't think it's fair, said Klaus Weber, associate professor of management and organizations at Northwestern University's Kellogg School of Management.

"I do think people now more than before care because of rising issues of income inequality and justice and the fact that large companies have come under more scrutiny," Weber said. "People expect corporations to fulfill their citizen duties as taxpayers like everyone else."

Among the many hypocritical ironies, given this trend of US companies becoming technically non-US companies, are the implications for the Citizens United Supreme Court ruling. How can a non-US company have the rights of a US citizen if it is incorporated in another country?

Of course, Chief Justice Roberts will figure out a way to bestow corporate citizenships on "undocumented" businesses operating in the US.

Then again, maybe the US Customs and Border Patrol Protection agency can arrest the expatriate corporations' executives as they step off their corporate jets. 

Of course, that won't happen: such harsh actions are reserved for kids seeking to escape violence and poverty in Central America and Mexico.  

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