The Lesson: People get upset when a company seems willing to forget its roots out of mere financial opportunism. Company chiefs will have to consider the growing possibility of consumer and political backlash in the U.S. in the face of such moves.
Dozens of large companies are contemplating the increasingly popular tax-skirting tactic known as “inversion” because U.S. corporate tax rates are much higher than in many other western countries, including Great Britain, which is in the process of slashing its corporate rates.
Pfizer garnered increased attention earlier this year as part of its since-abandoned bid to purchase UK-based pharma giant, AstraZeneca. But despite the setbacks and bad publicity, more companies keep exploring the issue. Troy, Mich.-based Delphi Automotive, for instance, once a part of General Motors, is now fighting as an independent company against U.S. government efforts to tax Delphi as a domestic corporation despite its previously established tax domicile in the UK.
In fact, a new report shows that 76 stateside companies shifted their headquarters out of the U.S. since 1983 to avoid corporate taxes, with a sharp increase recently in such deals. The policy research arm of the U.S. Congress said that 47 such deals had been transacted in the past decade alone and, of course, more are in the works.
The latter includes Walgreen. CEO Greg Wasson is considering moving the company’s headquarters from Chicago to Switzerland as part of a merger with Alliance Boots, a European drug-store chain. Such an outcome would save Walgreens an estimated $4 billion in federal taxes over five years.