US Treasury boss Jack Lew has urged Congress to crackdown on so-called tax inversions, the strongest sign yet the Obama administration is determined to ban the practice.
In a letter leaked to the Wall Street Journal, Lew said the US needed a new sense of “economic patriotism” and called on leaders to introduce retroactive laws neutering tax inversion deals completed since May 2014.
Tax inversions have driven the recent mini-boom in M&A deals, with the attempted takeover of Astrazeneca by Pfizer, the proposed takeover of Shire by AbbVie and Medtronic’s deal to acquire Covidien all be driven by inversions.
Tax rates for US businesses are among the highest in the world and firms are seeking to take over companies in countries with lower tax rates and redomicile to cut costs.
“They function to hollow out the US corporate income tax base,” Lew said in the letter to the Republican chairman of a Congressional tax committee Dave Camp. “Congress should enact legislation immediately – and make it retroactive to May 2014 – to shut down this abuse of our tax system.”
Shares in firms involved in tax inversions fell yesterday after the letter was published. UK-listed Shire fell 1.62 per cent and Covidien weakened by 1.6 per cent.