Many companies in the healthcare sector are undertaking so-called tax inversions to move their headquarters overseas. Here’s an explanation of why the trend has picked up.
Because the U.S. federal government is refusing to respond to international competition for the headquarters of successful multinational companies, U.S. multinationals are moving their headquarters out of the U.S. in order to protect their shareholders from high U.S. corporate tax rates. The shareholders needing protection include large numbers of retired and working U.S. citizens who have investments in company stock, either directly or through various collective investment vehicles.
As the following graph from a Baker & McKenzie presentation at a 2013 meeting for tax experts shows, the U.S. federal government was a lot smarter about the realities of global competition back in the 1980s. In the 1980s, it responded to international competition by reducing the U.S. corporate tax rate. Since then, it has increased the U.S. rate even as other countries have been lowering theirs, driving corporate headquarters out of the country.