The plan will see the Internal Revenue Service (IRS) introduce steps to prevent the practice known as tax inversion, with President Barack Obama denouncing it as ‘unpatriotic’.
The Associated Press quoted Obama recently, saying:
“They’re basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share,”
The IRS hope the move, being introduced largely because of the disparity between the UK and US Corporate Tax rates, will deter firms from moving abroad.
In the UK, the rate is soon to be set at 20 per cent, down from 21 per cent, to attract new investment. In the US the corporate rate is presently 35 per cent.
The news comes as Walgreen’s completed its full acquisition of Alliance Boots, with the US pharma investigating the viability of redomiciling its tax operations in the UK.
It also comes just three months after Pfizer’s AstraZeneca take over collapse and with Canadian pharmaceutical Abbvie preparing to purchase Shire, the Jersey-registered, Irish-headquartered biopharmaceutical company.
The motivation for both deals is widely thought to be over tax issues by many in the financial industry, partly at least.
A draft bill has already been drawn up for the plans. It sets out a framework which would impinge on foreign tax centres by increasing the 20 per cent threshold of shared-ownership with overseas-based firms.
Over a two-year period, any such deals would have to be structured to 50 per cent.