Wednesday, June 18, 2014

The Biggest Company Yet to Ditch the U.S. for Tax Reasons

The Fiscal Times reports:
Whhat Happened: Another huge merger in the health care sector driven, at least in part, by tax considerations. Medtronic, the world’s largest stand-alone maker of medical devices, has agreed to buy rival Covidien for $42.9 billion in a cash-and-stock move that will also allow the company to lower its overall tax burden by officially incorporating in Ireland.

The combined entity — to be named Medtronic plc – will have 87,000 employees in more than 150 countries. It will continue to have operational headquarters in Minneapolis, but will shift its executive base to Ireland, where the main corporate tax rate is 12.5 percent, far lower than the 35 percent nominal corporate tax rate in the U.S. Covidien has U.S. headquarters in Mansfield, Mass. but has been officially domiciled in Ireland since 2009.

Why It Matters: The merger is yet another example of U.S. companies relocating their headquarters to countries with lower tax rates — a tactic known as “tax inversion.” More than 40 companies have officially moved abroad or developed plans to do so, including 14 since 2012, according to Bloomberg. Medtronic would be the biggest yet.
Good for them, they are being responsible to their shareholders.

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