5 Giant Un-American Corporations Trying to Bolt U.S. to Avoid Taxes
BOSTON - JUNE 9: Shopper enters Walgreens store on June 9, 2013 in Boston. Walgreens is the largest drug retail chain in the United States with 8,300 stores in 50 states.
Photo Credit: Tupungato / Shutterstock.com
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Corporations get enormous benefits that regular “persons” do not. One of the biggest is limited liability. This means that the shareholders are not liable for the debts of the corporation. A corporation can get in a lot of trouble, financial and otherwise, and then just close up shop, divide its assets to its creditors, and the shareholders can just walk away losing only the money they originally put in. While it might be a “person” to certain members of the Supreme Court, there is no person to be made to work off the debt or to put in jail.
Corporations also enjoy lower tax rates than people do. (Except for the people who make a gain from the shares: they get a special, even lower tax rate called “capital gains.” Why is this? The capital gains tax rate is lower because the wealthiest make most of their income from capital gains, and the wealthiest make most of their income from capital gains because the capital gains tax rate is lower.)
And of course, corporate “persons” never have to die.
In return, we the people of the United States ask corporations to pitch in to help pay for the roads and courts and schools and scientific research and government contracts and the rest of the things that have helped make them the prosperous entities they are. But a number of American corporations are so fed up with the idea that should pay their taxes that they are actually renouncing their US citizenship. These corporations are "leaving" the US to dodge taxes—but their executives, employees, offices, stores, customers etc. are still here. The only thing that is really leaving the country is the requirement to pay US taxes.
These corporations are able to “leave” the US by engaging in something called inversion. Explaining an inversion is a bit complicated. A US company buys or merges with a non-US company, and the result is that the US company can be considered to be a company from the other country. But at the same time the company keeps most of its operations, etc. inside the US. The result is that it might still owe taxes on income reported as made in the US, but it owes no taxes on income elsewhere.
Here are five companies—only a handful of the total — that have or are trying to renounce their US citizenship to avoid paying taxes to help cover the benefits they receive.
Walgreens is the US’ largest pharmacy retailer with 8,200 stores and locations in all 50 states, and the company is currently deciding whether to renounce its U.S. corporate status and instead claim on paper to be a Swiss company. According to Americans for Tax Fairness, this move would mean Walgreens avoids paying $4 billion in US taxes in the next five years.
Americans for Tax Fairness points out that “Walgreens receives nearly a quarter of its income from taxpayers through government programs. Of its $72 billion in 2013 sales, an estimated $16.7 billion, or 23 percent, came from Medicare and Medicaid.” (See Is Walgreens Trying To Leave The U.S.?)
Medtronic Inc., a medical device maker with $17 billion in annual sales, is in the middle of purchasing Ireland’s Covidien for $42.9 billion as a tax-avoidance scheme.
One reason Medtronic is doing this, from the NY Times’ Dealbook:
Both companies are in the medical device business, but analysts and investors have said the deal makes sense largely because Medtronic can tap its $12 billion in overseas cash without paying United States taxes.