President Barack Obama talked this evening with Steve Liesman, senior economics reporter for CNBC, and called for Congress to strip away tax advantages that have encouraged a rush of mergers and acquisitions that give companies an overseas base. Obama could have been referring to pharmaceutical giant AbbVie, agreed to buy its European rival Shire for around $54 billion, allowing it to reincorporate in Britain. The move would lower its effective tax rate to 13 percent by 2016 from 22.6 percent in 2013, saving millions of dollars a year. But Obama didn't mention AbbVie by name.
Obama could have been referring to Chicago-area mainstay and Deerfield, Illinois based Walgreens Inc. Walgreen, the drugstore chain, has said it is considering a buyout of the British chain Alliance Boots that would similarly relocate its tax headquarters.
Both parties seem to agree on this issue in the short-term, but disagree what the long-term solution should look like. Leisman asked Obama about this issue of "tax inversions" which is American companies going overseas to reduce their U.S. tax bill or get rid of it. Liesman asked Obama point blank. "I take it you're not calling it illegal. Are you saying it's unpatriotic or un-American?"
Obama said, "Companies thrive in the United States in part because they benefit from the best university system in the world, the best infrastructure." Emphasizing the benefits of companies doing business in the United States and all of its benefits including the "entire architecture that helps you thrive."
"Simply changing your mailing address in order to-- avoid paying taxes-- then you're really not doing right by the country-- and by the American people," said Obama.
Obama accused companies with such activities as "Gaming the system." Obama added, "You are an American company. You-- continue to benefit-- in all kinds a ways from-- being an American company."
"This kind of strategy-- I think undermines people's confidence-- in how companies are thinking about their responsibilities to the country as a whole," Obama said.
U.S Senate Majority Leader Harry Reid (D-NV) was less diplomatic than Obama. Reid said if Walgreens decided to move its headquarters to Switzerland it would be the definition of "exploitation." “The company that Charles Walgreen started is reportedly considering a renunciation of its American citizenship and a move to Switzerland, just to avoid paying its fair share of taxes,” Reid said on the Senate floor Wednesday. “This practice, what some call ‘inversion,’ is a tax trick — a loophole.”
Walgreens announced this week that it would buy Swiss-based retailer and wholesaler Alliance Boots. It could then move its headquarters to Switzerland to avoid taxes, but no such announcement has been made yet.