The US treasury today announced a stricter than expected crackdown on tax inversions. Tax inversion deals happen when a company takeover is designed to reduce the amount of tax US companies pay by moving their headquarters to low tax jurisdictions.
The UK and irelands lower tax rate has particular significance in the recent takeover of Shire (SHP.L) by AbbVie and the attempted takeover of Astrazeneca (AZN.L) by Pfizer. Both companies have been selling off this morning on the back of the news.
The new legislation, whilst had been expected for a while was much stricter than had been expected and the decision will make any takeover deals much less profitable than they could have been in the past.
US treasury secretary Jacob Lew said in a statement “We’re taking initial steps that we believe will make companies think twice. For some companies considering deals, today’s actions will mean that inversions no longer make economic sense. These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether.”
These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether
The US treasury today announced a stricter than expected crackdown on tax inversions. Tax inversion deals happen when a company takeover is designed to reduce the amount of tax US companies pay by moving their headquarters to low tax jurisdictions.
The UK and irelands lower tax rate has particular significance in the recent takeover of Shire (SHP.L) by AbbVie and the attempted takeover of Astrazeneca (AZN.L) by Pfizer. Both companies have been selling off this morning on the back of the news.
The new legislation, whilst had been expected for a while was much stricter than had been expected and the decision will make any takeover deals much less profitable than they could have been in the past.
US treasury secretary Jacob Lew said in a statement “We’re taking initial steps that we believe will make companies think twice. For some companies considering deals, today’s actions will mean that inversions no longer make economic sense. These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether.”
These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether
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