Inversion Issue Comes Home to Roost for CEOs  

Certainly Wall Street is concerned that they might. Bearish investors have been circling Covidien Plc out of concerns that Medtronic Inc. will modify its inversion-predicated offer to buy fellow medical-device maker Covidien. “Despite the claims of corporate apologists, international business ‘competitiveness’ has nothing to do with the reasons for [inversion] deals,” Jim Strugger, derivatives strategist for MKM Holdings, told Bloomberg.

“Despite the claims of corporate apologists, international business ‘competitiveness’ has nothing to do with the reasons for [inversion] deals.”

Meanwhile, a credible academic alleged to be shedding some extra light on the issue by arguing that the U.S. tax code actually is not impeding global competitiveness, contrary to the assertions of corporate chieftains. “Despite the claims of corporate apologists, international business ‘competitiveness’ has nothing to do with the reasons for [inversion] deals,” wrote Edward D. Kleinbard, a law professor at the University of Southern California and a former chief of staff of the Congressional Joint Committee on Taxation. “Whether one measures effective marginal or overall tax rates, sophisticated U.S. multinational firms are burdened by tax rates that are the envy of their international peers.”

But by raising the profile of the corporate-tax issue, inversions may end up benefiting CEOs anyway because discussion of the tactic is rallying some to their defense. “Don’t expect other companies to bypass” savings from inversions, warned a Detroit News editorial. “In a global economy, counting on the better nature of corporations is no substitute for rational tax policy … Those taxes should be fair.”

Despite such opinions, expect the tide on this issue to keep going against the freedom for business leaders to decide on inversion without political interference.