The Pros And Cons Of US Tax Inversion

On Monday September 22, 2014, the U.S Treasury Department tightened the rules as it pertains to taxes, to deter U.S. companies from moving their headquarters to lower-tax countries (Paletta). This is a way for the White House to slow down the wave-of so-called corporate inversions that ultimately reduce federal tax revenues (Paletta). Treasury officials took action under five sections of the U.S. tax code to make inversions harder and less profitable, removing some of the appeal that has made the transactions more common in recent years, especially in the pharmaceutical industry (Paletta). In an inversion, an American company reincorporates, for tax purposes, in a tax-friendlier country. These can include countries such as the U.K. or Ireland, while maintaining its actual headquarters in the U.S. According to officials, the tax inversion rules were effectively immediately. These new guidelines could impact a number of pending mergers and acquisitions that are yet soon to close their deal (Paletta). The biggest question is why is the government deciding to create these new rules to implement to corporations? What

Many U.S Companies thought it to be devastating because of the perception the treasury was presenting. They feared that the Treasury was only doing the bare minimum for these industries just to appear as if they care. On the other hand, the IRS feels like there is a possibility that these new rules made inversion look very appealing to other companies. Tax inversion has not and will not totally disappear but because of the loop holes it may increase. The progress of these new laws will take place slowly so there will be a very small economic effect on the economy (drug companies in particular). The future laws and regulations will ultimately determine how this issue will have an impact (negatively or positively) on the