Exclusive: Curbing tax-driven business moves abroad a priority - U.S. Treasury

Wed Apr 30, 2014 4:15pm EDT
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By Kevin Drawbaugh

(Reuters) - The Obama administration is seeking ways to curb tax-dodging by U.S. businesses that reincorporate overseas, a U.S. Treasury official told Reuters on Wednesday, highlighting growing concern about deals known as "inversions."

"Cracking down on companies that reincorporate overseas to reduce their U.S. taxes is a priority for the administration," the official said in an email responding to questions about a pending administration proposal and recent events.

U.S. drugmaker Pfizer Inc (PFE.N: Quote) said on Monday it has made takeover bids for UK rival AstraZeneca Plc (AZN.L: Quote) in a possible

deal to merge the two into a UK holding company with a UK tax domicile. Like many other inversion structures, Pfizer's operational headquarters would remain in the United States.

About 50 U.S. companies have done similar transactions in the past 30 years, relocating their tax residences to lower-tax countries via mergers or other restructuring arrangements, but making few changes to their core U.S. business operations. About half of these transactions have occurred since 2008.

President Barack Obama's 2015 budget, introduced in early March, includes a proposal to crack down on inversions by making them more difficult to do with higher minimum levels of foreign ownership required.

With the U.S. Congress deadlocked over tax-and-spending policy, the chances of an inversion crackdown becoming law soon were slim, said analysts, though it could not be ruled out.

"The most effective way to reduce inversion incentives is through fundamental tax reform, which we don't see Congress taking up until 2015 at the earliest," said Terry Haines, head of political analysis at private macro research firm ISI Group.   Continued...

The ticker symbol for AstraZeneca is displayed next to a ticker for Pfizer on the floor of the New York Stock Exchange April 28, 2014. REUTERS/Brendan McDermid