You’ve probably heard some of the hoopla about “inversion” — a strategy that several big U.S. companies are using to avoid paying taxes. Inversion involves merging with a foreign company in a country that has a lower tax rate, and then declaring that the company’s home base is in that foreign country.
More and more companies are doing it. In the past year, at least 47 U.S. companies have used the strategy, and more are in the works. The strategy is legal, but many believe it’s not ethical. Particularly when the majority of a company’s operations are in the U.S.
Many, including the President, Treasury Secretary Jack Lew, and Senior Editor-at-large of Fortune Magazine Allan Sloan, call inversion unpatriotic. Sloan wrote a recent article saying that, “Undermining the finances of the U.S. government by inverting helps undermine our economy.”
But until tax reform starts seeing some real action, inversion will continue to be a popular strategy. The good in all this is that the acceleration of inversions has sparked more serious conversation about tax reform. Maybe the lawmakers will finally take action.