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Corporate Tax Inversion
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Book Synopsis How U.S. Corporate Inversions Impact Shareholder Value by : MaryKate MacDonald
Download or read book How U.S. Corporate Inversions Impact Shareholder Value written by MaryKate MacDonald and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This report examines how U.S. corporate tax inversion announcements impact shareholder value. A corporate tax inversion is where a corporation moves its location of residency to a new jurisdiction with a lower tax rate than that of its original location of incorporation. Corporate operations are usually continued in the location with the higher federal effective tax rate. Since the first U.S. inversion in 1983, there have been more than 75 inversions (Marples & Gravelle, 2016). There has been growing division over the issue of whether or not inversions are acceptable as a result of the U.S. tax base deteriorating. Many politicians have been searching for ways to control the number of inversions through legislation. As a result, inversion trends have been changing due to governmental regulation, international business, and public opinion. For this analysis, data is collected on 49 corporate inversions that occur from 1983 to 2016. Event studies are conducted on individual trends to determine what types of inversions create the most value. Results indicate that pharmaceutical corporations completing merger and acquisition (M&A) inversions in Ireland after 2007 are valued the most by shareholders.
Book Synopsis Medtronic PLC and Corporate Tax Inversions by : Monica Shelton
Download or read book Medtronic PLC and Corporate Tax Inversions written by Monica Shelton and published by . This book was released on 2016 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This case deals with the very topical subject of tax inversions. In the case, students are initially introduced to the concept of the tax inversion, the process by which a U.S. company reincorporates in another country, often as part of a corporate acquisition. Case participants (students) will learn one of the goals of such a corporate maneuver is to reduce the company's income tax burden. In the first section of the case, students are lead through the actual structuring of the 2014 Medtronic/Covidien inversion. They will be challenged initially to explain the inversion process, the purported benefits, and the likely tax treatment of the companies and shareholders. The student objectives are threefold in section two of the case. First, the students are charged with actually calculating Medtronic effective income tax rates before and after the inversion to attempt to prove a benefit from a decrease in the effective tax rate. Second, case participants will be immersed in the non-GAAP measures the company uses to explain inversion tax benefits. Finally, students are charged with preparing a pro-forma quantification of tax savings for the Medtronic/Covidien inversion and developing an argument as to whether or not it is actually a benefit and sustainable.
Author :Congressional Research Service Publisher :Createspace Independent Publishing Platform ISBN 13 :9781976517983 Total Pages :28 pages Book Rating :4.5/5 (179 download)
Book Synopsis Corporate Expatriation, Inversions, and Mergers by : Congressional Research Service
Download or read book Corporate Expatriation, Inversions, and Mergers written by Congressional Research Service and published by Createspace Independent Publishing Platform. This book was released on 2017-09-18 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: News reports in the late 1990s and early 2000s drew attention to a phenomenon sometimes called corporate "inversions" or "expatriations" instances where U.S. firms reorganize their structure so that the "parent" element of the group is a foreign corporation rather than a corporation chartered in the United States. The main objective of these transactions was tax savings, and they involved little to no shift in actual economic activity. Bermuda and the Cayman Islands (countries with no corporate income tax) were the location of many of the newly created parent corporations. These types of inversions largely ended with the enactment of the American Jobs Creation Act of 2004 (JOBS Act, P.L. 108-357), which denied the tax benefits of an inversion if the original U.S. stockholders owned 80% or more of the new firm. The act effectively ended shifts to tax havens where no real business activity took place. However, two avenues for inverting remained. The act allowed a firm to invert if it has substantial business operations in the country where the new parent was to be located; the regulations at one point set a 10% level of these business operations. Several inversions using the business activity test resulted in Treasury regulations in 2012 that increased the activity requirement to 25%, effectively closing off this method. Firms could also invert by merging with a foreign company if the original U.S. stockholders owned less than 80% of the new firm. Two features made a country an attractive destination: a low corporate tax rate and a territorial tax system that did not tax foreign source income. Recently, the U.K. joined countries such as Ireland, Switzerland, and Canada as targets for inverting when it adopted a territorial tax. At the same time, the U.K. also lowered its rate (from 25% to 20% by 2015). Several high-profile companies had more recently indicated an interest in merging with a non-U.S. headquartered company, including Pfizer, Chiquita, AbbVie, and Burger King. This "second wave" of inversions again raises concerns about an erosion of the U.S. tax base. Chiquita and AbbVie have canceled their plans in the wake of new Treasury regulations, but Burger King and other firms are continuing merger plans. Pfizer subsequently terminated its planned merger with Allergan after Treasury regulations issued in 2016. Two policy options have been discussed in response: a general reform of the U.S. corporate tax and specific provisions to deal with tax-motivated international mergers. Some have suggested that lowering the corporate tax rate as part of broader tax reform would slow the rate of inversions. Although a lower rate would reduce the incentives to invert, it would be difficult to reduce the rate to the level needed to stop inversions, especially given the effect of the revenue loss on the budget. Other tax reform proposals suggest that if the United States moved to a territorial tax, the incentive to invert would be eliminated. There are concerns that a territorial tax could worsen the profit-shifting that already exists among multinational firms. The second option is to directly target inversions: H.R. 1931, H.R. 3434, and S. 1636 would treat all mergers as U.S. firms if the U.S. shareholders maintain control of the merged company, as well as impose other restrictions. S. 1673 would tax accumulated earnings of inverting firms. H.R. 1932 and S. 851 would include anti-inversion provisions as part of a broader proposal to address tax havens and deferral. H.R. 3603 would address earnings-stripping of inverted corporations. H.R. 3424 would disallow federal contracts for inverted firms. H.R. 1451 and S. 586 would make major changes in the tax treatment of foreign source income and tighten existing anti-inversion rules. On September 22, 2014, the Treasury announced regulatory measures to limit some of the benefits of inversions. Evidence from news accounts and statistical data suggest that inversions have declined.
Book Synopsis Corporate Tax Inversion by : Rachael Ann Ruba
Download or read book Corporate Tax Inversion written by Rachael Ann Ruba and published by . This book was released on 2016 with total page 624 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Firm Value Effects of Treasury Regulations by : Amanda Marino
Download or read book Firm Value Effects of Treasury Regulations written by Amanda Marino and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the effect of administrative authority on shareholder value. Specifically, I study Treasury Regulations related to IRC ℗ʹ7874, which were intended to significantly diminish the ability of U.S. multinational companies to avoid U.S. tax through inversion. I find a negative market reaction on dates when Treasury signals it will strengthen inversion restrictions and a positive reaction when the courts overturn Treasury's attempts. Firms with high likelihood of inversion experience the strongest reaction, consistent with the market recognizing firm-level factors that make the use of this tax strategy more likely. I find that the initial notice related to the regulations elicits a stronger reaction than either the temporary or final regulations themselves. The study broadens our understanding of how shareholders react to Treasury Regulations, and how the intensity of that reaction varies along the path to enactment. It also brings some clarity to a mixed body of research regarding the economic impact of corporate inversions.
Book Synopsis Corporate Inversions by : Fredrick White
Download or read book Corporate Inversions written by Fredrick White and published by Nova Science Publishers. This book was released on 2014-12 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The U.S. corporate income tax is based on worldwide economic activity. If all of a corporation's economic activity is in the United States, then tax administration and compliance is, relatively, straight-forward. Many corporations, however, operate in several jurisdictions, which creates complications for tax administration and compliance. Further, corporations may actively choose where and how to organise to reduce their U.S. and worldwide tax liabilities. Some of these strategies have been referred to as expatriation, inversions, and mergers. This book examines them in light of recent expansion of their use and growing congressional interest. This book also focuses on the global issues relating to tax rate differentials between the United States and other countries. It provides tax rate comparisons; discusses policy implications, including the effect of a corporate rate cut on revenue, output, and national welfare; and discusses the outlook for and consequences of a revenue neutral corporate tax reform.
Book Synopsis The Declining Allure of Being 'American' and the Proliferation of Corporate Tax Inversions by : John Hamlett
Download or read book The Declining Allure of Being 'American' and the Proliferation of Corporate Tax Inversions written by John Hamlett and published by . This book was released on 2016 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the realm of tax polic ...
Book Synopsis Reinterpreting Corporate Inversions by : Inho Andrew Mun
Download or read book Reinterpreting Corporate Inversions written by Inho Andrew Mun and published by . This book was released on 2018 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate inversions have drawn outrage from all segments of society. In an inversion, a company reincorporates abroad to escape its U.S. tax burden. Regulators and academics have typically sought tax law solutions to curb tax inversions. However, the resulting tax regulations have been ineffective, while more radical tax reforms are not politically feasible. This Note argues that inversion is not a tax problem in isolation, but a problem of aligning tax paid with benefits conferred by a given country. By introducing non-tax dimensions into the equation, this Note refines the oft-ignored benefit tax theory. The benefit tax theory proposes that the U.S. corporate tax regime accounts for superior legal and nonlegal benefits that companies enjoy by incorporating or operating in the United States. While paying U.S. tax, corporations receive the benefits of corporate governance, securities regulation, intellectual property law, and other areas of law; furthermore, benefits include many nonlegal business factors such as access to a large consumption market, skilled labor pool, capital markets, and more.This Note classifies the relevant benefits into three categories: Type I benefits, which corporations enjoy regardless of their place of incorporation or operation; Type II benefits, which corporations enjoy only if they are incorporated in the United States; and Type III benefits, which corporations enjoy by having operations in the United States. Using this classification, this Note builds a novel multi-dimensional regulatory competition model wherein countries compete across various legal and nonlegal dimensions, as opposed to the one-dimensional tax competition model on which inversion scholars have typically relied.The benefit tax theory and the multi-dimensional competition model illustrate that the problem with inversions is that corporations continue to take advantage of Type III benefits offered by the United States while paying lower tax elsewhere to a non-U.S. country. Inversion is problematic precisely because of the unbundling of certain Type III benefits from the rest of U.S. tax law. Understanding the inversion problem in this way leads to a clear solution: a better bundling of the U.S. tax law with the Type III benefits provided by the United States.
Book Synopsis Corporate Inversions : Rules and Strategies by : J.G.S. Yang
Download or read book Corporate Inversions : Rules and Strategies written by J.G.S. Yang and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article investigates the American phenomenon "corporate inversion" and how much income tax the strategy can actually save. It further explains the inversion rules and offers tax planning strategies to reduce a corporation's tax burden.
Book Synopsis The Paradoxical Impact of Corporate Inversions on US Tax Revenue by : Rita Gunn
Download or read book The Paradoxical Impact of Corporate Inversions on US Tax Revenue written by Rita Gunn and published by . This book was released on 2016 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate inversions - reorganizations that result in relocating corporate tax domiciles from the US to a foreign country - are alleged to cost the US Treasury billions of dollars in tax revenue. Contrary to these assertions, we find that that inverting firms pay no less taxes after the inversion than they did before. Moreover, contrary to the common belief, we estimate that the inversions result in US shareholders realizing $81,415.92 million in capital gains and annual increases in dividends of $9,959.37 million. Thus, paradoxically, inversions are likely to increase tax collections by the US Treasury.
Book Synopsis Are Corporate Inversions Good for Shareholders? by : Anton Babkin
Download or read book Are Corporate Inversions Good for Shareholders? written by Anton Babkin and published by . This book was released on 2019 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate inversion, the process of redomiciling for tax purposes, reduces corporate income taxes, but it imposes a personal tax cost that is shareholder-specific. We develop a model, incorporating the corporate tax benefits and personal tax costs, to quantify the return to inversion for different shareholders. Foreign and tax-exempt investors, along with the chief executive officer, disproportionately benefit. We show that an inversion simultaneously reduces the wealth of many taxable shareholders. The model illustrates an agency conflict in which heterogeneity in personal taxes generates a wealth transfer between shareholders. Furthermore, personal taxes offset the loss in government revenue by 39%.
Book Synopsis Corporate inversions by : United States. Congress. House. Committee on Ways and Means
Download or read book Corporate inversions written by United States. Congress. House. Committee on Ways and Means and published by . This book was released on 2002 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :United States. Congress. Senate. Committee on Appropriations. Subcommittee on Treasury and General Government Publisher : ISBN 13 : Total Pages :80 pages Book Rating :4.F/5 ( download)
Book Synopsis Corporate Inversion by : United States. Congress. Senate. Committee on Appropriations. Subcommittee on Treasury and General Government
Download or read book Corporate Inversion written by United States. Congress. Senate. Committee on Appropriations. Subcommittee on Treasury and General Government and published by . This book was released on 2003 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :United States. Congress. House. Committee on Ways and Means. Subcommittee on Select Revenue Measures Publisher : ISBN 13 : Total Pages :80 pages Book Rating :4.0/5 ( download)
Book Synopsis Corporate inversions by : United States. Congress. House. Committee on Ways and Means. Subcommittee on Select Revenue Measures
Download or read book Corporate inversions written by United States. Congress. House. Committee on Ways and Means. Subcommittee on Select Revenue Measures and published by . This book was released on 2002 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Tax Inversions written by Phillip Fuller and published by . This book was released on 2017 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax inversions are a popular topic of discussion among politicians, consultants, news outlets, and academics. Tax inversions are not a new topic; they were discussed in the early 1990s and in the previous decade. Tax inversion is a tax strategy in which a company reincorporates in another country for tax purposes. Several U.S. firms have merged with foreign firms in order to move their headquarters out of the U.S. Firms have defended their tax inversions by saying that inversions enhanced shareholders' wealth by increasing the firms' efficiencies and/or reducing their corporate taxes. The federal government has attempted to reduce and/or eliminate tax inversions. The government is concerned that tax inversions will reduce the tax base at a time when the federal government is experiencing budget deficits and the national debt is at an all-time high. Furthermore, individuals are increasingly aware of the huge financial disparity between the wealthiest members of our society and everybody else, and they believe tax inversions exacerbate this disparity in wealth. This paper discusses the history of tax inversions along with tax inversion research, and addresses current status of inversions and possible solutions. The purpose of this paper is to help individuals better understand tax inversions.
Book Synopsis Corporate Inversions and Whack-a-Mole Tax Policy by : Bret Wells
Download or read book Corporate Inversions and Whack-a-Mole Tax Policy written by Bret Wells and published by . This book was released on 2014 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article argues that policymakers must address the fundamental tax disparity that creates corporate inverses or else changing forms of inversion transactions will continue to pop-up like moles in a whack-a-mole game. Instead of attacking the inversion symptoms, the United States must comprehensively address the base erosion advantages provided to inbound foreign-based MNEs and protect its source country right to tax profits that originate from within its borders since the base erosion and profit-shifting advantages afforded to inbound foreign-owned MNEs is what fuels these inversion transactions. Thus, the article argues that policymakers need to adopt reform measures that seek to eliminate the significant tax advantages given to foreign ownership of U.S. business activities in order to equalize the playing field between U.S.-based MNEs and foreign-based MNEs. This is the fundamental lesson we are overdue to learn from the corporate inversion phenomenon.
Book Synopsis The Tax Inversion Problem by : Phillip Fuller
Download or read book The Tax Inversion Problem written by Phillip Fuller and published by . This book was released on 2017 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax inversions are a popular topic of discussion among politicians, consultants, news outlets, and academics. Tax inversions are not a new topic; they were discussed in the early 1990s and in the previous decade. Tax inversion is a tax strategy in which a company reincorporates in another country for tax purposes. Several U.S. firms have merged with foreign firms to move their headquarters out of the U.S. Firms have defended their tax inversions by saying that inversions enhanced shareholders' wealth by increasing the firms' efficiencies and/or reducing their corporate taxes. The federal government has attempted to reduce and/or eliminate tax inversions. The government is concerned that tax inversions will reduce the tax base at a time when the federal government is experiencing budget deficits and the national debt is at an all-time high. Furthermore, individuals are increasingly aware of the huge financial disparity between the wealthiest members of our society and everybody else, and they believe tax inversions exacerbate this disparity in wealth. This paper briefly discusses why solving the tax inversion problem is politically problematic.
