US closes loopholes to curb corporate tax inversions

AFP, Washington :
The US Treasury took action Monday to halt a rising torrent of US companies moving offshore to cut their tax bills, saying the surge in so-called inversions threatened government income.
The move to close loopholes that encourage US companies to merge with a foreign firms and relocate their tax residences offshore could stifle takeovers announced this year worth hundreds of billion of dollars.
Those include several high-profile medical industry deals, including AbbVie’s $55 billion purchase of Shire and Medtronic’s $43 billion merger with Covidien, as well as Burger King’s$11 billion tie-up with Tim Hortons, and Chiquita Banana’s proposed $1 billion merger with rival Fyffes.
The Treasury said it was moving after Congress failed to act on the issue.
“We cannot wait to address this problem,” said Treasury Secretary Jacob Lew.
“These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and, when possible, stopping them altogether.”
The measures take aim particularly at expectations that a company, after an inversion, would be able to take advantage of earnings accumulated and held by the US partner offshore without ever paying taxes on it.
Currently many US companies retain substantial foreign earnings offshore to avoid taxes they would have to pay upon repatriating them into the United States.