In a measure aimed to punish companies that are moving overseas to pay lower taxes, Senator Dick Durbin says he plans to unveil a bill that would ban federal contracts for businesses that engage in tax inversions, the Chicago Tribune reports.
Dubbed the “No Federal Contracts for Corporate Deserters Act,” the bill pertains to companies that not only incorporate overseas but also are majority-owned by U.S. shareholders and don’t have a history of “substantial business opportunities in the foreign country in which they are incorporating,” adds the Tribune.
The proposed legislation is yet another blow that lawmakers are seeking to deal against the recent wave of companies planning on relocating to more tax-friendly locales overseas. A prominent recent example of an inversion is the one anticipated by Chicago-based AbbVie, which is set to reincorporate in the United Kingdom after its $54 billion agreed-upon acquisition of Shire plc is completed.
Yesterday’s news about Midwest injectable drugs maker Hospira possibly doing the same if it buys the medical nutrition business of Paris-based Danone for $5 billion also sparked further talk on a topic that has become an ongoing source of ire in Washington.
According to the Tribune, Walgreens, which recently announced it was acquiring Swiss-based Alliance Boots, is contemplating making a similar move. But a spokesperson for the drug retailing chain says it hasn’t decided yet about doing a tax inversion.Durbin is the latest lawmaker to take part in a growing chorus of dissent against tax inversions. Last week President Obama called on Congress to draft legislation that would temporarily halt the exodus of America companies he sees as fleeing to foreign countries to escape paying higher taxes.
The issue could have severe fiscal repercussions for the country’s economy, according to the Obama administration. The Tribune reports that the White House says a loss of $20 billion in corporate taxes could be incurred the next decade if tax inversions continue.
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