{"id":2308,"date":"2014-11-04T18:36:41","date_gmt":"2014-11-04T22:36:41","guid":{"rendered":"http:\/\/www.daytonastateinmotion.com\/?p=2308"},"modified":"2018-05-13T18:50:18","modified_gmt":"2018-05-13T22:50:18","slug":"inversion-of-u-s-companies-a-disturbing-trend","status":"publish","type":"post","link":"https:\/\/www.daytonastateinmotion.com\/oldsite\/inversion-of-u-s-companies-a-disturbing-trend\/","title":{"rendered":"Inversion of U.S. companies a disturbing trend"},"content":{"rendered":"

Brandon Krampert
\nIn Motion Staff Writer<\/p>\n

\"Tim<\/a>
Tim Fleenor\/ In Motion<\/figcaption><\/figure>\n

According to a Reuters review, 50 inversion deals have been made since the early 1980\u2019s. This occurrence has been made more prevalent since the financial crisis of 2008, which accounts for roughly half of them.<\/p>\n

Inversion is a phenomenon in which U.S. corporations can opt out of paying taxes to the federal government by having at least 20 percent of their shareholders as citizens of another country and gain tax status there, which may be more lucrative for the company.<\/p>\n

One way that companies do this is by purchasing and merging with a company outside the U.S. and making it an option for the other company to accept shares instead of actual money. It is surprising which companies have either followed through with or have begun negotiations of inversion deals recently; to name a few: Walgreens, Chiquita, Medtronic, AbbVie and Burger King.<\/p>\n

The most recent is Burger King\u2019s purchase of the Canadian firm Tim Hortons in late September, which is a chain of restaurants known for their coffee and donuts headquartered in Ontario. Burger King has already moved their headquarters to Ontario from Miami, Fla. and the corporation will now enjoy a corporate income tax rate of around 15 percent instead of 35 percent in the U.S.
\nThe companies said that the deal will make the merger the world\u2019s third largest fast food company with $23 billion in sales and more than 18,000 locations.<\/p>\n

The deal has been estimated at about $11 billion. Peculiarly, this is how the transaction worked; Burger King offered to pay $59.74 and 0.8025 common shares of the new company. Alternatively, Tim Hortons shareholders could choose all cash or all stock in the new company as well.<\/p>\n

In spite of accusations of the intentions of the two companies\u2019 business dealings, Scott Bonikowsky, a Tim Hortons spokesman, claimed that the deal is fuelled by prospects of long-term growth.<\/p>\n

Regardless of intentions, how is this harmful to the economy or more generally, to the people of the U.S.?<\/p>\n

Burger King in addition to many other companies is essentially evading taxes in a country where they started, developed and grew. If these companies are free to move for tax purposes, the U.S. government can react in one of two ways.<\/p>\n

The government can either raise taxes in other areas to make up the significant difference or impose more austerity, the slashing of social services in an economy that still hasn\u2019t truly recovered since the financial crisis.<\/p>\n

Still, the question remains if companies should be free to leave, given the tax loophole at the expense of the American public to pay higher taxes or lose more government services.<\/p>\n

In the very same month of the Burger King merger, this issue came to the attention of the Obama Administration and the U.S. Treasury department.<\/p>\n

The U.S. Treasury department announced actions in effect immediately to attempt to discourage inversion that included prohibiting hopscotch loans that let companies access foreign cash without paying U.S. taxes and not allowing companies to repatriate foreign profits without paying taxes.<\/p>\n

The Obama Administration is also urging congress to craft legislation to change the 20 percent limit for companies to invert to 50 percent.<\/p>\n

Following the action, President Obama said in a statement, \u201cWe\u2019ve recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill.\u201d
\nBased on the data that was presented earlier in the Reuters review, it\u2019s quite apparent that this phenomenon is not just a few bad apples and is accelerating in intensity and can potentially become very problematic for the U.S. economy.<\/p>\n

The reforms that have been put into effect or urged by the Obama Administration are lukewarm at best unfortunately. Who\u2019s to say U.S. companies wouldn\u2019t go to greater lengths if the share limits were changed in order to make more profit?<\/p>\n","protected":false},"excerpt":{"rendered":"

Brandon Krampert In Motion Staff Writer According to a Reuters review, 50 inversion deals have been made since the early 1980\u2019s. This occurrence has been made more prevalent since the financial crisis of 2008, which accounts for roughly half of them. Inversion is a phenomenon in which U.S. corporations can Continue reading Inversion of U.S. companies a disturbing trend<\/span>→<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":2309,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2308","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/posts\/2308","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/comments?post=2308"}],"version-history":[{"count":3,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/posts\/2308\/revisions"}],"predecessor-version":[{"id":2312,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/posts\/2308\/revisions\/2312"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/media\/2309"}],"wp:attachment":[{"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/media?parent=2308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/categories?post=2308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.daytonastateinmotion.com\/oldsite\/wp-json\/wp\/v2\/tags?post=2308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}