Business Review Board / April 5, 2016

Inversion Regs an Attempt to Protect Tax Revenue

Leftists think all money belongs to Washington.

Barack Obama’s Department of Treasury continued its crusade against companies seeking to avoid the cripplingly high corporate tax rate in America by announcing new rules Monday to stifle the practice of tax inversions — restructuring a company so as to avoid the U.S.‘s high tax rates. This is the second time Treasury has declared regulation against tax inversions, and it won’t be the last. In a statement, Treasury Secretary Jacob Lew said, “These actions took away some of the economic benefits of inverting and helped slow the pace of these transactions, but we know companies will continue to seek new and creative ways to relocate their tax residence to avoid paying taxes here at home. Today, we are announcing additional actions to further rein in inversions and reduce the ability of companies to avoid taxes through earnings stripping.” Earnings stripping is the practice of funneling profits to another country so that the company can enjoy its lower tax rates. As this move by Treasury demonstrates, leftists think all money belongs to Washington; we only get to borrow some of it.

Immediately, Treasury announcement [affected the stock] of Pfizer Inc. and Allergan PLC. The two companies are in the middle of a $150 billion merger. The Wall Street Journal reported the regulation seemed to target the companies’ merger. Indeed, instead of fostering a place where the U.S. government competes for global business through skilled workers and friendly tax policies, the bureaucrats in Washington only want to play cronyism, siphoning off the profits of companies they trapped through regulation.

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