Corporate tax inversions: Prevent more Mylans
As U.S. corporations increasingly flee uncompetitive U.S. tax rates through deals that base them overseas, the Obama White House and some congressional Democrats propose banning such moves. But what's needed is comprehensive tax reform that lowers rates, encouraging activity, increasing tax revenue and keeping U.S. firms at home.
In what's known as a “corporate tax inversion,” generic drug giant Mylan Inc. is acquiring, for $5.3 billion in stock, Abbott Laboratories' overseas generic business based in the Netherlands — and reorganizing as a corporation based there. Mylan will keep its Cecil headquarters and pay U.S. taxes on domestic profits but not on what it makes abroad.
CEO Heather Bresch expects lower Dutch taxes to cut Mylan's effective tax rate from 25 percent to 21 percent in the deal's first year, to the high teens in three to five years. She says competitors' similar moves forced Mylan to join the ranks of corporate tax exiles.
Sen. Carl Levin, D-Mich., has proposed a two-year moratorium on tax inversion deals. His brother, Rep. Sander M. Levin of Michigan, the House Ways and Means Committee's ranking Democrat, says the issue “cannot wait for comprehensive tax reform” — yet comprehensive reform is the issue.
Ms. Bresch's father, U.S. Sen. Joe Manchin, D-W.Va., says corporate tax inversions are symptoms of a larger problem for U.S. firms' global competitiveness that requires comprehensive tax reform. Without it, there will be even more former U.S. companies — and even less tax revenue.