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Curbing tax-driven business moves abroad a priority: US Treasury

The Obama administration is focused on finding ways to curb tax-motivated reincorporations to other countries by U.S. businesses, a U.S. Treasury official told Reuters on Wednesday.

"Cracking down on companies that reincorporate overseas to reduce their U.S. taxes is a priority for the administration,'' a Treasury official said in an emailed statement.

U.S. drugmaker Pfizer proposed buying AstraZeneca for about 58.8 billion pounds ($98.7 billion) in what would rank as the industry's biggest-ever takeover, surpassing Pfizer's $64 billion purchase of Wyeth in 2009.
Simon Dawson | Bloomberg | Getty Images
U.S. drugmaker Pfizer proposed buying AstraZeneca for about 58.8 billion pounds ($98.7 billion) in what would rank as the industry's biggest-ever takeover, surpassing Pfizer's $64 billion purchase of Wyeth in 2009.

U.S. drugmaker Pfizer said on Monday it has made takeover bids for UK rival AstraZeneca in a possible deal to merge the two into a UK holding company with a UK tax domicile. The proposed deal would keep the operational headquarters in New York.

Such deals, known as "inversion'' transactions have been growing in popularity, and President Barack Obama's 2015 budget included a proposal to crack down on inversions.

But with the U.S. Congress deadlocked over tax-and-spending policy, the chances of the inversion rule proposal becoming law soon were slim.

"Inversion transactions illustrate the need for comprehensive business tax reform that would lower corporate tax rates and limit the ability of multinationals to shift income outside the U.S.,'' the Treasury official said, noting that the administration knows such deals "are occurring and aren't being caught by the current rules.''

About 50 U.S. companies have done similar "inversion'' transactions in the past 30 years, in which they relocate their tax residences to lower-tax countries via corporate deals. About half of these transactions have occurred since 2008.

Omnicom, the biggest U.S. advertising company, is in the midst of a trying to merge with French rival Publicis Groupe SA into a Netherlands-based holding company with a UK tax domicile, though the deal has encountered delays.

The Obama proposal would tighten tax rules to make inversions more difficult to carry out.

The Internal Revenue Service on Friday issued a notice limiting shareholders' tax-free treatment in inversions.

—By Reuters

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