오바마 대통령 시절의 기사를 새삼스럽게 들춰봅니다.

트럼프가 미국 대통령에 당선되기 이전, 오바마 대통령 시절의 기사를 새삼스럽게 들춰봅니다. 

지난 2016년 4월 8일자 뉴욕타임즈 기사입니다. 

Free Pfizer! Why Inversions Are Good for the U.S.

트럼프는 이민유입을 막기 위해 벽을 치고 싶어하고, 오바마는 떠나는 미국회사를 유지하기 위해 가상의 벽을 구축하고자 했습니다. 

그때 '어느 쪽도 효과가 없을 것이다.'고 다이아나 기자는 썼습니다. 

이제 대통령은 트럼프가 되었고, 그의 뜻대로 미국에 공장들이 들어섭니다. 앞으로는 어떨지 모르나... 미국 투자를 늘리고 있습니다. 일자리를 미국에 만든다는 얘기이지요. 

국내에 더 많이 투자하지 않고 있는데,.. 국내 일자리를 늘린다는 空約이 하늘에서 불꽃놀이처럼 무수히 난무합니다. 예산만 늘리면 일자리가 늘어난다는 보도자료를 믿고, 하늘에서 떨어질 것이라 믿고, 공약을 공약으로 믿고 살아야 하겠지요. 그렇게 정권은 누군가 잡을 것이고 국민은 또 실망하겠지요. 

DONALD J. TRUMP wants to build a bricks-and-mortar wall to keep immigrants out of the United States. President Obama wants to build a virtual wall to keep companies from leaving. Neither is likely to work.

On Monday, the Treasury Department issued new regulations in an attempt to limit “inversions” — in which American companies are acquired by foreign companies, legally lowering the tax burden of American companies. Speaking at the White House, Mr. Obama said, “We shouldn’t make it legal to engage in transactions just to avoid taxes.”

And with that, the $152 billion merger between Pfizer and the Irish drug company Allergan was dead.

Some observers believe that Treasury structured the regulation for the express purpose of killing this deal. Ernest Christian, formerly a lawyer at the Treasury Department, told me that a targeted rule like that erodes trust in government. “It’s like King John going after the peasants’ money hidden in haystacks,” Mr. Christian said. “That’s what led to the Magna Carta.”

Since in the United States, statutory corporate tax rates are among the highest in the industrialized world, and America taxes companies on their worldwide incomes, companies in practically any other country make tempting inversion targets. Those in low-tax countries like Ireland are particularly popular.

Inversions have been concentrated among pharmaceuticals and medical device companies but are also occurring in other sectors. Burger King merged with the Canadian coffee chain Tim Hortons. Any American company with operations abroad has an incentive to invert, especially if it wants to bring capital back to the United States.

What are the Treasury’s changes? First, the regulation does not allow gains from inversions in the three prior years to count toward the size of the foreign company, which has to be of a certain size relative to an American partner for an inversion to take place.

This is precisely what ended the planned merger between Pfizer and Allergan, which grew through a series of inversions, most recently with Irish-based Actavis in 2015. Actavis, originally based in Switzerland, was acquired by Watson Pharmaceuticals in 2012, and the combined company, called Actavis, took over Warner Chilcott in 2013 and became Irish. Then, it took over United States-based Forest Labs in 2014.

Under the old rules, Pfizer shareholders would have owned 56 percent of the combined company, enough to substantially lower its United States taxes. Under the new rules, Pfizer would own between 60 and 80 percent, subjecting it to much higher United States taxes.

Second, under the new regulations, Pfizer would lose the benefit of what is known as “earnings stripping,” where an American subsidiary can borrow funds from the overseas parent company and pay tax-deductible interest under United States law, reducing its taxes. The new regulation gives the Internal Revenue Service immense power over this debt.

For example, the I.R.S. could declare some or all of Pfizer’s debt to be equity, so the interest payments would be dividends and no longer deductible. It’s important to note that the new earnings-stripping regulations apply not just for inversions, but for a vast array of multinationals’ transactions involving American businesses.

This approach was proposed by the Harvard Law School professor Stephen E. Shay in 2014. Writing in Tax Notes, he argued that the Treasury secretary has “direct and powerful regulatory authority to reclassify debt as equity and thereby transform a deductible interest payment into a nondeductible dividend.”

So what’s wrong with these rules? Simply, the government fails to see the benefits of inversion. As Treasury states in the description of the rule: “Typically, the primary purpose of an inversion is not to grow the underlying business, maximize synergies, or pursue other commercial benefits. Rather, the primary purpose of the transaction is to reduce taxes, often substantially.”

Treasury fails to see that by reducing taxes companies can grow their businesses. A company like Medtronic that has recently inverted to Ireland by merging with Covidien can expand its American operations at lower cost than can its competitors, thus starting a domino effect of inversions within the industry. With lower tax bills, these companies are freer to invest money here.

Our rules also unfairly punish American-based multinationals over their foreign rivals. If an American-based multinational wants to bring back overseas earnings to expand its plant in Wisconsin, or build a new one, the company would have to pay taxes of 35 percent on amounts brought home, minus the tax paid in the country where the money was earned. If it returned $100 million that hadn’t been taxed previously, only $65 million would be available for investment.

If a foreign-based multinational wanted to invest $100 million in a Wisconsin plant, then all $100 million would be invested in this scheme. Badger State residents and shareholders are better off under foreign investment.

The solution is not burdensome new rules, but lower taxes. Inversions are increasing because American taxes are out of line with foreign codes. Until that changes, inversions will continue. Rather than trying to block companies from leaving, President Obama would do better by making America more hospitable to global headquarters.

Correction: April 13, 2016

 

An Op-Ed essay on April 8 about the benefits of corporate inversions referred incompletely to the tax paid by American multinationals on money repatriated to the United States. The money is taxed at 35 percent minus the taxes paid in the country where the money was earned. It is not taxed at a flat 35 percent.

Diana Furchtgott-Roth, a former chief economist at the Department of Labor, is a senior fellow and director of Economics21 at the Manhattan Institute.