Dive Brief:
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United States Treasury secretary Jacob J. Lew Monday released new rules making it harder for U.S.-based retailers and other American businesses to duck taxes by moving their headquarters abroad, a practice known as a “tax inversion.”
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The new rules apply to any proposals starting today and could apply to pending plans.
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The regulations use a series of roadblocks to deter certain transactions — like internal loans, stock buys, and other moves that companies use to shift or hide American earnings as foreign ones — by making them less financially attractive.
Dive Insight:
The goal of these regulations is to make so-called tax inversion moves less financially attractive to businesses. Recent potential tax inversions include a now-ditched plan by Walgreens to leverage its $5.27 billion cash acquisition of U.K. drugstore retailer Alliance Boots.
Several members of Congress said the new rules won’t do much, and Lew agrees. But Lew also said that, while action by Congress is preferable to regulations by the Treasury, nothing is likely to be done before the November elections. But, he said, the Obama administration would act to the fullest extent it can because these tax-avoidance moves, though legal, are “wrong.”