Tax Inversion is currently big business. Billion dollar companies are relocating their HQs for tax reasons and it seems to be a trend that is not just isolated to certain industries or sectors.
Despite the initial trend starting in the pharmaceutical industry, what we are seeing now is that more and more diverse companies and industries are embracing and practicing the idea. For instance, Burger King have recently bought out Tim Horton’s in Canada for the purpose of establishing their HQ there for tax benefits.
It is a very controversial practice, it is not tax evasion but is closely toeing the line.
So is this something that companies are going to continue doing in future?
In reality it is not a new thing at all, there are several places where companies have established HQs in order to pay less tax, San Marino, Jersey and even the Cayman Islands are prime examples of this. However, having large multinational companies relocate is something that is relatively new.
The recent attempted buyout of AstraZeneca by Pfizer was rumoured to be a move towards inversion from the US pharmaceutical company, and analysts have even earmarked several companies in the UK and Ireland thanks to the comparatively favourable business tax systems there.
A recent Whitehouse initiative has attempted to stem the tide of companies loading their debt onto the US divisions of the company and headquartering abroad, but according to Stephen Foley at the Financial Times, he believes this will in fact speed up the process of companies leaving. The US Government has even referred to companies who are utilising inversion as ‘tax deserters’.
The truth is that with countries continuing to try and attract large companies to their shores, in order to collect their (admittedly less that in the US) taxes. As we are still in recovery in a post-recession economy, this is only going to continue. So unfortunately, as unpleasant as the idea seems to those working within these companies, this looks like a trend that is set to continue for the foreseeable future, with tax jurisdictions being moved about frequently to try and gain advantages for multinationals.