While the federal government may be trying to prevent U.S. corporations from relocating overseas for tax purposes, it has failed to stop companies that have already completed such deals from doing their own follow-on acquisitions of U.S. companies.
Dozens of inversion deals are at risk of penalization by a top Senate Democrat's proposal to limit future deductions for companies that attempt to reincorporate overseas.
The Organization for Economic Cooperation and Development has revamped efforts to overhaul the international tax system as it presented its first set of guidelines to finance ministers of the group of 20 largest economies. The guidelines are an attempt to make it more difficult for companies to shift profits to low tax countries.
Two new developments in negotiations over taxes could mean lawmakers are one step closer to restricting inversion deals.
Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc. in a move that would relocate the hamburger seller's headquarters to Canada.
Treasury Department officials are preparing an arsenal of administrative weapons for Secretary Jacob Lew to use in the government's battle to prevent U.S. companies from reincorporating overseas in an effort to avoid paying federal taxes, otherwise known as tax inversion.
While the U.S. maintains the highest corporate tax rate at 35 percent, a paper published earlier this month by University of Southern California law professor Edward Kleinbard, suggests many companies use a system of elaborate tax loopholes to avoid paying anywhere near that amount.
Samsung Electronics Co. is sitting on $60B in cash, that's 58% larger than Apple's cash pile, and the Korean tax man has sent a message to the country's biggest company: "Use it or lose it."
Senate Democrats moved to discourage the use of inversion by outlining a proposal that would restrict the practice of earnings stripping, where U.S. companies borrow money from overseas parents and deduct the interest expense on U.S. taxes.
U.S. retailer Walgreen Co has decided to cancel its plan to reincorporate overseas to lower its tax bill, amidst a political push from the Obama administration to curb such corporate tax domicile-shifting deals.