- If Pfizer is successful in acquiring U.K.-based AstraZeneca, its plan to redomicile there will save it millions in corporate taxes. The tax arbitrage scheme, called an inversion, creates a holding company in the foreign country with the lower tax rate. Britain's corporate tax rate is 21% (20% next year) which is substantially lower than the U.S.'s top rate of 35% (up to 40% when state and local taxes are included).
- About 24 U.S. companies have employed this strategy since 2008. Ireland, Canada, Switzerland and the Netherlands are also popular destinations for redomiciling.
- According to Reuters, many of the m&a deals this year have been driven, at least in part, by tax inversions.
- Predictably, investment bankers are working feverishly to generate deals in various industries that take advantage of the loophole before Congress acts to close it.
- Some lawmakers say that the best solution is to reform the U.S. business tax code.
- ETFs: SPY, QQQ, SH, DIA, SSO, SDS, PSQ, VOO, IVV, SPXU, UPRO, SPLV, TQQQ, SPXL, QID, PRF, SPXS, RSP, SQQQ, DOG, QLD, DXD, RWL, EPS, UDOW, SDOW, USMV, DDM, VV, SCHX, IWB, OEF, SPHB, NY, MGC, BXUB, QQEW, QQQE, VONE, FEX, JKD, XLG, TRND, SFLA, EQL, QQXT, SPLX, BXUC, ROLA, BXDB, EEH, TNDQ, SPXH, ONEK, IWL, TRSK, PXLC, EWRI, ERW, FWDD, LGLV, FMK, ALTL, SYE
Tax inversion deals highlight the need for tax code reform in the U.S.
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