Tax inversions where you change your official country of incorporation usually by means of a merger has become a hot button issue recently. According to Bloomberg about 41 U.S. companies have reincorporated in low-tax countries since 1982 and 12 companies since 2012 have done so. The recent offer (which was rejected) by Pfizer to purchase AstraZeneca in order to acquire a U.K. address for tax purposes brought this issue front and center to the American public.
Politicians from both major political parties are criticizing corporations undertaking this option calling this behavior in some cases “Un-American.” While it is no surprise that politicians are making political hay out of this issue (especially in light of the upcoming midterm elections in November). However do inversions make a significant difference in terms of the fiscal health of the United States? In a recent note, Nicholas Colas and Jessica Rabe of Convergex put forth statistics: Including the fact that corporations are only responsible for ~10% of all U.S. tax receipts that makes us think this is not nearly as big of an issue as politicians or journalists would like you to believe.
For their note in its entirety please click here.
