Tax-Dodging Deal Fails Thanks To Obama’s Inversion Rules – And Us

Dave Johnson

Politicians often don’t know about a problem – never mind fix it – unless people organize and make their feelings known. When you sign an online petition, send an email and especially donate to a cause, it can make a real difference. In the case of companies “renouncing their citizenship” in order to dodge their taxes, it really did work.

You probably heard that companies like Burger King and others were “renouncing their citizenship” as a scheme to get out of paying taxes they owe us. They were using a complicated transaction called an “inversion” to make it seem like these U.S. companies were not U.S. companies. To make it simple, they would buy a non-U.S. company, then claim that the non-U.S. company was the “parent” company. Then they would claim they no longer had to pay certain U.S. taxes, including taxes on already-made, non-U.S. profits they were hoarding outside the U.S..

A company called AbbVie was preparing to do one of these inversions, to get out of paying its U.S. taxes. In September the Obama administration introduced new rules cracking down on these companies. The administration was responding to the public outcry that was generated by organizations like Campaign for America’s Future and others, including our online petitions. Then last month AbbVie cancelled the tax-dodging inversion deal. AbbVie had billions of already-booked profits stashed outside the U.S., and would have been able to get out of paying the taxes it owed. But the new rules from the Obama administration would make them pay the taxes they owed, so they cancelled the deal. The New York Times reported, “The unraveling of the merger came swiftly, just weeks after the Treasury Department announced new rules taking aim at inversion deals. […] In announcing the termination of the deal, AbbVie lashed out at the Obama administration for changing the rules so abruptly.”

Explaining Complex Issues

One of the things that helps giant corporations get away with various forms of tax-dodging like an inversion is that most people have a hard time making their way through the complexities involved. At CAF we work to explain these complexities in ways more people can understand. We’ve been writing and writing about corporate inversions and other schemes, explaining how they work and what is wrong with them. Other publications like The Huffington Post, AlterNet, Truthout, Daily Kos, Crooks and Liars and others have carried our work.

CAF posts explaining inversions, the Walgreens and Burger King inversions and general offshore tax-dodging schemes included:

We have also been sending out petitions and joining with other organizations to send out petitions. We think all of this has made a difference. In this case it has made a difference measured by billions of additional dollars that can be used to fund our schools, roads, and other public needs.

A central organization in this effort is Americans for Tax Fairness, a coalition of many progressive-aligned groups including Campaign for America’s Future. ATF’s statement on AbbVie’s cancellation of their tax-dodging deal, Tax Fairness Coalition Praises Abbvie’s Decision Not To Pursue A Corporate Inversion thanks President Obama for the new inversion rules:

“At the end of 2013, AbbVie had $21 billion in profits offshore on which it had not yet paid U.S. income taxes. It is likely that AbbVie would have avoided paying billions of dollars of U.S. taxes on this offshore income if it had gone through with a corporate inversion. That’s real money that can be used to do real things here in America to make our country stronger.

“Taxpayers have President Obama to thank because his Administration closed several tax loopholes that made inversions very attractive. The Treasury Department and IRS recently issued a notice that effectively prevents companies from using an inversion to avoid paying taxes on the profits they have booked offshore – and not paid U.S. taxes on.

Take a look at their Tax Fairness Briefing Booklet. “It contains guidance on the most effective ways to talk about the economy and taxes; key findings from polls conducted for Americans for Tax Fairness, other organizations and media outlets; and fact sheets on key topics like offshore corporate tax loopholes and the estate tax.”

Next

Now we need to elect a Congress that will stop these corporate traitors by passing tough legislation that not only stops them from renouncing their U.S. citizenship to dodge their taxes, but makes them pay the taxes they owe on non-U.S. profits.

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