High Tech Companies Moving Off Shore To Avoid High US Taxes

Yahoo: Tech Companies May Join Flight from US Taxes

Wednesday, 02 Jul 2014 06:58 PM

By John Morgan

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American technology companies have not jumped on the bandwagon yet in the trend toward U.S. corporations moving their headquarters to other countries to escape high taxes, but analysts say that could change.

Yahoo Finance predicted the practice, called tax inversion mergers, could have special appeal for tech firms.

Other industries are already moving toward that strategy. Using tax inversion strategies, Walgreen is contemplating shifting its tax basis to Switzerland as part of a merger with Europe’s Alliance Boots, and medical device concern Medtronic is eyeing a corporate move to Ireland in its merger with Covidien.

“The strategy also allows companies access to cash held overseas without paying the 35 percent U.S. tax. That’s a big issue for many tech companies,” wrote Yahoo’s Aaron Pressman.

Morgan Stanley’s Katy Huberty suggested Lexmark International, Teradata and NCR are three particularly tech firms that could benefit from an overseas tax move.

“All three have loads of cash overseas and enough profits to benefit from a tax cut. None of the companies have said they are planning a tax inversion deal,” Pressman said.

Christopher Rolland, an analyst at FBR & Co., speculated semiconductor firms like Texas Instruments, NVDIA and Xilinix could also profit from a tax-related relocation. “The potential for a change in the tax code could provide a powerful incentive for companies to
consummate transactions before the window closes, perhaps at the end of the year,” Rolland said.

Pressman predicted “there’s no doubt Wall Street bankers will be pitching inversions to all manner of companies, including technology stalwarts.”

Bloomberg reported Medtronic is the biggest company yet with plans to renounce its U.S. “tax citizenship.”

At least 44 American companies have reincorporated abroad or laid plans to do so, including 14 since 2012, according to Bloomberg. The U.S. corporate tax rate is the highest among developed nations.

Those who have already moved elsewhere, mostly to Europe, include Perrigo, Tower Group, Eaton, Jazz Pharmaceuticals, Alkermes, Valeant, Tim Hortons and Lazard.



Related Articles:

• US Offshore Tax Evaders Beware: FATCA Starts
• Treasury Official on Medtronic Deal: Tax System Is Awry

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