Likely to cost the government close to $20 billion over the next 10 years, the increasingly popular corporate inversion continues to serve as an easy out for businesses trying to escape the U.S.’s enormous 35% corporate tax.
One of the 50 largest companies in the world, pharmaceutical company AbbVie, joined the growing list of corporate escapees when they completed a $54 billion takeover of the Irish biopharmaceutical innovator, Shire, last month.
But, efforts to pull-the-plug on this major loophole have been slow, if not stagnant, amongst law-makers.
Both Republicans and Democrats have called for legislation to end inversions, but in the absence of a, much needed, corporate tax overhaul and reform. While congress chooses to ignore the more important issue of reforming the U.S.’s corporate tax, businesses have created other avenues to circumvent taxes irrespective of whether or not legislation pulls-the-plug on inversions, solely.
Not to mention, the mere threat of new legislation to cut off the inversion outlet seems to be quickening the pace of offshore inversions. “Wall Street is whispering in the ears of all these corporate executives saying, ‘Congress might shut this down, you’ve got to do it now,’ ” said Rebecca J. Wilkins, senior counsel at the Institute on Taxation and Economic Policy.
Aside from corporate inversions, U.S corporate tax revenues continue to erode as the result of two additional loopholes being exploited. One of the loopholes is the master limited partnership, where companies pass all profits along to shareholders and are therefore exempt from paying corporate taxes.
The other loophole being exploited is, yet, another pass-through entity much like the aforementioned master limited partnership. The real estate investment trust has also been experiencing record popularity amongst corporate businesses. In the case of the real estate investment trusts, the trusts pass profits along to investors, exempting them from corporate taxes.
These flaws in the corporate tax system and the legislation (or lack thereof) attached to acquiring corporate taxes has created a tremendous stir over social media. The public opinion of Congress and their decision-making process and progress has been unfavorable at best. Many people making some very valid points in their social media posts, such as these:
PogoWasRight had this to say, “It seems to me that our culture has always believed that “fair is fair”. If that is the case, and the SCOTUS has declared that Corporations are people, why then cannot people be considered Corporations and move their assets and income offshore to avoid paying taxes?”
Mike from NYC said, “This is what we need to do to counter these tax inversions. Wake up Congress and tell them that what we need in our country are tax laws which DEEM all money earned by US corporations and their phony-baloney subsidiaries to be US Taxable Income regardless of where it’s earned and regardless of whether the US corporation ever brings that money home.
This is exactly how individual US citizens are treated under the same circumstances. As with individuals, the corporations would, of course, get dollar-for-dollar tax credits for foreign taxes paid on those same earnings.”
It looks like Congress better wakeup before tax revenues dwindle down to next-to-nothing, while businesses continue to search for more loopholes to avoid the corporate tax.