As part of its efforts to stop tax inversions, the U.S. Department of Treasury has officially announced new regulations that would help achieve this goal. Alongside this new regulations, U.S. companies are now merging with its foreign counterparts and headquarter abroad, allowing them to save big time in terms of tax bills.
For instance, Johnson Controls, a Milwaukee-based auto parts supplier has merged with Tyco, an Ireland-based company. As a result of the merging of these two companies, a headquarter will be set in Ireland and take advantage of its tax system. Such move will allow the companies to save $150 million annually. This amount can then be used for research, and development as well as employee compensation programs.
This is the third set of new inversion regulations set forth by the Treasury Department in the past 19 months.
According to The Californian, the merging efforts will "not only to better service customers and shareholders but also to make them more robust to ward off takeover attempts."
It is high time for U.S. corporate taxes to be in line with international norms. "Sensible reform would reduce the U.S. corporate tax rate of 35(PERCENT) - the highest in the developed world - and end double taxation by moving to the 'territorial' system used by other countries, where companies pay taxes only on their domestic earnings."
It is reported that the present case forces the American companies doing business overseas to be taxed twice: in the home country and in the country where the profits are earned.
This puts them at an unfair disadvantage as compared with their foreign competitors as the latter is free to invest their worldwide earnings in the U.S. free from taxes.
Having a tax reform will give the U.S. corporate companies a better view when it comes to investments and earning profit. It will also give them the opportunity to use the savings for other purposes that would benefit both the company and its employees.
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