The Obama administration’s executive orders intended to prevent companies from leaving the country may be working on at least one U.S. business.
Chicago pharmaceutical company announced Tuesday night that it would reconsider its plans to purchase British drugmaker Shire and move its headquarters to the United Kingdom, a deal that was intended to reap tax benefits for Abbvie.
Abbvie said that it had notified Shire that its board of directors would meet Oct. 20 to reconsider the deal, partly to assess the Treasury’s executive action intended to curb such deals and its “impact to the fundamental financial benefits of the transaction.” The board is likely to back away from the deal at the meeting, according to Bloomberg.
That would be a victory for Treasury Secretary Jack Lew, who announced the measures on Sept. 22, saying they were intended to “meaningfully reduce the economic benefits” of inversions like Abbvie’s. Inversions, which have been a growing concern for U.S. lawmakers, are tax maneuvers in which a U.S. firm buys a smaller foreign company in a low-tax country and places its headquarters there to save on taxes. The Treasury action applied to deals pending at the time that Lew made the announcement.
The news of Abbvie’s reconsideration was welcomed by Sen. Dick Durbin, D-Ill., one of the top congressional advocates of legislation to prevent companies from leaving the U.S.
“I’m encouraged by reports that Abbvie will reconsider its decision to move its tax address out of the United States,” Durbin said Wednesday. “When corporations choose to invert and don’t pay their fair share of taxes, they leave the rest of us to pick up the tab.”
Durbin credited the Obama administration with its action to prevent inversions and called for Congress also to act. “Congress must follow suit by passing a legislative solution to eliminate incentives for companies to renounce their corporate citizenship and turn their backs on American taxpayers,” he said.
Top legislators with jurisdiction over tax policy have been working on proposals to reduce inversions in the short-term, but Republicans who favor comprehensive corporate tax reform remain opposed to most of the measures advanced by Democrats. Lew, who also favors a comprehensive overhaul, has said that only Congress can fully address the inversions problem.
