Walgreens
is the pharmacy that, at least according to its website, can be found
“at the corner of Happy & Healthy.” If its executives have their
way, however, it may soon be found near the intersection of
Ziegelackerstrasse and Untermattweg in Bern, Switzerland. By acquiring
the much smaller Swiss company that is located near that corner, the
American company can dodge millions in American taxes.
What would that mean for the 4,200 employees who work at Walgreens headquarters in Deerfield, Illinois? Probably nothing, as Deerfield’s local newspaper (a branch of the Chicago Sun-Times) explains. “Inversion,” as these maneuvers are called, doesn’t actually mean a company moves anything. Like the Panamanian flag fluttering on a second-class freighter, all it tells you is that a vessel for hire has found a new and more compliant registry.
Call it the “Inversion Evasion.” Walgreens would become a “Swiss company” for tax avoidance purposes only. The combined corporation would do a small percentage of its business there. In all other respects, however, the corporation would remain fully American – headquartered here, making most of its profits here, and continuing to use its lobbying dollars and campaign money to distort the American political process.
All of which raises the question: How does it feel to be the CEO of a “defector corporation”? Do such executives face the opprobrium of society as they continue to frequent fine dining establishments and enjoy the fruits of this land that has given them so much?
So far, apparently not. But that may be changing. The inversion trick hasn’t received much public attention, but it’s quickly moving into the spotlight. Illinois Sen. Richard Durbin has already written a letter suggesting that Walgreens could become the subject of a boycott it if decides (“pretends” might be a better word) to become a Swiss corporation.
So far these moves have taken place under the public’s radar. But “defector CEOs” may be beginning to feel the heat. That’s usually when they call on cooperative journalists like Andrew Ross Sorkin of the New York Times who has dutifully inflated and set aloft a puff piece on behalf of Heather Bresch, the CEO of a pharmaceutical company called Mylan and the daughter of United States Sen. Joe Manchin of West Virginia.
The headline given to Sorkin’s piece reads “Reluctantly, Patriot Flees Homeland for Greener Tax Pastures.” That’s a droll and inventive formulation that can be applied to many situations, as in: “Reluctantly, Loving Husband Flees Wife for Younger Woman.”
Sorkin credulously reports that Bresch loves her country and “left” it (there’s no evidence she’ll physically relocate) with great regret, a rhetorical inversion that was received with mordant amusement in knowledgeable quarters. Bresch is unable to mount a coherent defense for her actions, despite Sorkin’s tender ministrations. The usual “taxes are too high” trope is dug up, but when pressed by Sorkin she’s unable to name a tax rate that would persuade her to keep the company in the U.S.
Maybe that’s because she doesn’t have a real complaint. Statutory corporate tax rates – that is, the “official” rate – are high in the United States, but the actual rate paid by corporations is quite low. It’s just that there will always be a country out there willing to charge a little less, no matter how low our rates, in return for the chance to channel some funds out of the U.S. economy.
The policy choice is simple: Either end “inversions” or be condemned to an endless race to the bottom on tax rates. That’s a race the American people are doomed to lose.
Mylan and Bresch defected for an initial gain of 4 percent on Mylan’s tax rate, according to Bresch herself, with the expectation that this advantage will roughly double in future years.
For that, Bresch and her colleagues are prepared to renounce their corporation’s American “citizenship.” (If corporations are “persons,” as is the current legal fiction, they’re certainly not very loyal ones.)
Now Walgreens seems poised to join that list. Walgreens CEO Greg Wasson unashamedly told analysts on a recent investor call that the company is actively exploring use of the inversion tactic. Like virtually all CEOs, Wasson is highly compensated. And, like most of them, he collects that compensation even when he has a very bad year. From the looks of things, he also shares with his peers a certain lack of patriotism.
Bresch is right about one thing: CEOs who put on what Bresch calls their “business hats” – which is, after all, their fiduciary responsibility – will continue to find this form of “silent defection” extremely attractive. The end result? Executives whose companies were born of American ingenuity and which make their profits from American customers (including the government) will nonetheless be obliged to troll international waters for opportunities in low-cost tax havens.
What would that mean for the 4,200 employees who work at Walgreens headquarters in Deerfield, Illinois? Probably nothing, as Deerfield’s local newspaper (a branch of the Chicago Sun-Times) explains. “Inversion,” as these maneuvers are called, doesn’t actually mean a company moves anything. Like the Panamanian flag fluttering on a second-class freighter, all it tells you is that a vessel for hire has found a new and more compliant registry.
Call it the “Inversion Evasion.” Walgreens would become a “Swiss company” for tax avoidance purposes only. The combined corporation would do a small percentage of its business there. In all other respects, however, the corporation would remain fully American – headquartered here, making most of its profits here, and continuing to use its lobbying dollars and campaign money to distort the American political process.
All of which raises the question: How does it feel to be the CEO of a “defector corporation”? Do such executives face the opprobrium of society as they continue to frequent fine dining establishments and enjoy the fruits of this land that has given them so much?
So far, apparently not. But that may be changing. The inversion trick hasn’t received much public attention, but it’s quickly moving into the spotlight. Illinois Sen. Richard Durbin has already written a letter suggesting that Walgreens could become the subject of a boycott it if decides (“pretends” might be a better word) to become a Swiss corporation.
So far these moves have taken place under the public’s radar. But “defector CEOs” may be beginning to feel the heat. That’s usually when they call on cooperative journalists like Andrew Ross Sorkin of the New York Times who has dutifully inflated and set aloft a puff piece on behalf of Heather Bresch, the CEO of a pharmaceutical company called Mylan and the daughter of United States Sen. Joe Manchin of West Virginia.
The headline given to Sorkin’s piece reads “Reluctantly, Patriot Flees Homeland for Greener Tax Pastures.” That’s a droll and inventive formulation that can be applied to many situations, as in: “Reluctantly, Loving Husband Flees Wife for Younger Woman.”
Sorkin credulously reports that Bresch loves her country and “left” it (there’s no evidence she’ll physically relocate) with great regret, a rhetorical inversion that was received with mordant amusement in knowledgeable quarters. Bresch is unable to mount a coherent defense for her actions, despite Sorkin’s tender ministrations. The usual “taxes are too high” trope is dug up, but when pressed by Sorkin she’s unable to name a tax rate that would persuade her to keep the company in the U.S.
Maybe that’s because she doesn’t have a real complaint. Statutory corporate tax rates – that is, the “official” rate – are high in the United States, but the actual rate paid by corporations is quite low. It’s just that there will always be a country out there willing to charge a little less, no matter how low our rates, in return for the chance to channel some funds out of the U.S. economy.
The policy choice is simple: Either end “inversions” or be condemned to an endless race to the bottom on tax rates. That’s a race the American people are doomed to lose.
Mylan and Bresch defected for an initial gain of 4 percent on Mylan’s tax rate, according to Bresch herself, with the expectation that this advantage will roughly double in future years.
For that, Bresch and her colleagues are prepared to renounce their corporation’s American “citizenship.” (If corporations are “persons,” as is the current legal fiction, they’re certainly not very loyal ones.)
Now Walgreens seems poised to join that list. Walgreens CEO Greg Wasson unashamedly told analysts on a recent investor call that the company is actively exploring use of the inversion tactic. Like virtually all CEOs, Wasson is highly compensated. And, like most of them, he collects that compensation even when he has a very bad year. From the looks of things, he also shares with his peers a certain lack of patriotism.
Bresch is right about one thing: CEOs who put on what Bresch calls their “business hats” – which is, after all, their fiduciary responsibility – will continue to find this form of “silent defection” extremely attractive. The end result? Executives whose companies were born of American ingenuity and which make their profits from American customers (including the government) will nonetheless be obliged to troll international waters for opportunities in low-cost tax havens.
'Chiding Corporate Defectors' is the main thrust of this article - but what exactly is the criticism all about? Capitalism is global, transnational and heralded as such. Capitalism's rules expect companies to produce the highest profit possible for their shareholders and owners. If it's acceptable to outsource production to a country with cheaper labour costs (even knowing it will create unemployment in the original country) and thereby make greater profits for the company why, by the same logic, is it not OK to 'outsource' the company itself to further increase personal wealth?
SOYMB decries all aspects of capitalism. Patriotism, nationalism, pecuniary interest, fear of one section of a population taking advantage of another and access to anything provided one can pay for it will all disappear when we make the decision to abandon and abolish this divisive capitalist system for one based on egalitarianism and free access for all - socialism.
JS
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