Tuesday, July 29, 2014
Tax Inversions: The Basics
I have been asked a lot lately about inversions. As if VOX read my mind, here is a nice peice by Matthew Yglesias, Tax Inversions: 9 Questions About the Hottest New Trend in Tax Avoidance, with some of the basics.
Here is part of the introduction: "In a modest tax inversion, Company A decides to acquire Company B for some standard set of business reasons. It then turns out to be the case that domiciling the merged entity in Company B's homeland is more advantageous for tax purposes. Companies, like people, normally seek to exploit legal means of reducing their tax burden. So the merged company will probably domicile itself for tax purposes in Company B's country.
In a pure tax inversion, Company A decides to acquire Company B specifically in order to execute a tax inversion. In other words, Company A would be acquiring Company B not so much to obtain its technology or its brand or its supply chain but its tax status."