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International Investing – Tax Inversions

June 27, 2014

The world is a big place – there are over 190 countries and 7 billion people in the world, which really boggles the mind if you sit down and think about it. In addition to being an interesting intellectual exercise, this fact can also have broad implications for your investments and your financial future. It is easy to stay focused on U.S. firms, news, and events during the day-to-day grind, but it is always important to be aware of your surroundings – especially when it comes to your investments. With that in mind, this series of articles will focus on countries and investment opportunities outside the United States that you might not usually hear about.

As always, be sure to consult a financial services professional familiar with both the potential investment and your unique financial situation before embarking on any investment program.

Tax Inversions

Taxes are an unpleasant, but necessary, part of life for both individuals and corporations, at least most of the time. Corporate tax rates have become hot news in the press lately; some members of Congress want to cut corporate tax rates, others want comprehensive tax reform, and yet others want to close loopholes and raise rates. In essence, the tax situation in the United States is complicated, politicized, and deadlocked at the current time.

So what are firms doing?

Acquiring firms located overseas, in lower tax regions, and relocating “headquarters” to that lower tax jurisdiction allows these organizations to avoid taxes.

While this type of deal making has always existed, it seems to have picked up in volume during the last year or so (see attached links), as technology and pharmaceutical firms are attempting to take full advantage of these tax benefits. An excellent point to remember, however, is that while taxes should definitely be a consideration in any merger/acquisition, there are a wide variety of factors related to operations and other regulatory policies that have to be taken into consideration.

As we all saw with the Alstom deal, which the French government only approved if the French government takes a 20% in the deal, international deal making is rife with complications.

As always, I have attached some links with more information

Happy Reading!

http://www.cnbc.com/id/101791244

http://online.wsj.com/articles/medtronics-irish-jig-not-as-easy-as-it-seems-1403220286

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10916906/Tax-inversions-why-Britains-companies-are-being-pursued-by-US-rivals.html

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