This has been “a bad week for America’s reputation as an open, free-trading country”, warns the boss of one of the world’s largest independent financial advisory organizations.
Walgreen not relocating its tax base out of U.S.
The comments from Nigel Green, the founder and CEO of deVere Group, follow Walgreen Company (NYSE:WAG)’s shock announcement Wednesday that it will not relocate its tax base out of the U.S. when it completes its acquisition of Alliance Boots, which is headquartered in Switzerland.
Stone House Capital Partners returned 4.1% for September, bringing its year-to-date return to 72% net. The S&P 500 is up 14.3% for the first nine months of the year. Q3 2021 hedge fund letters, conferences and more Stone House follows a value-based, long-long term and concentrated investment approach focusing on companies rather than the market Read More
Walgreen Company (NYSE:WAG)’s decision comes after mounting political pressure to halt so-called inversions, whereby U.S. companies acquire overseas firms in countries such as the U.K to mitigate higher American tax rates. President Obama has described those companies considering this measure as “corporate deserters.” The Senate Finance Committee has recently been informed that 25 major groups are mulling over inversions.
Pro-business reputation in danger: Inversions are misguided
Mr Green says: “The grandstanding by Mr Obama and some politicians on inversions is misguided and shows a lack of understanding about how business works.
“It is right and appropriate that companies, such as Walgreen, amongst others, consider all the legal options available to them to mitigate their tax burdens. Indeed, firms have an obligation to do this for their shareholders. By significantly reducing their annual bills, companies are able to reinvest, expand their operations, provide higher return to their investors, higher wages to staff, and/or lower prices to consumers.
“Yet, Walgreen, and others, has been publicly lambasted by some politicians – who are eager to appear to be championing ‘the national interest’ – for looking at certain options. Indeed, the drugstore chain’s CEO has partly based this week’s inversion rethink on the risk of ‘political ramifications’.”
Political posturing and ill-conceived meddling in business hampering reputation
Mr Green continues: “This sets a dangerous precedent. The political posturing and ill-conceived meddling in business could act as a deterrent to future domestic and foreign investment as investors could, on the whim of opportunist politicians and so-called ‘tax activists’, be forced into paying more tax than they are legally required to because it suits their own political and/or public agendas.
“This flies in the face of America’s time-honored, enviable and hard-won pro-business reputation.”
He adds: “For political leaders to pressurise firms on this matter, and take the supposed moral high ground, when they are the ones who have the powers to change the tax laws, smacks of hypocrisy.
Pro-business reputation: Inversions as being “immoral”
“The notion firms are ‘getting away’ with mitigating their taxes is absurd as tax mitigation in this way is perfectly legal. Fully aware of this, politicians are now accusing companies considering inversions as being ‘immoral’.
“But tax isn’t and never should be a question of morality. It is a legal impost and it is firms’ obligations to comply with the law and pay what is legally required.”
The deVere Group CEO concludes: “Overall, this has been a bad week for America’s reputation as an open, free-trading country.”
In July, Nigel Green commented: “It is our experience that the vast majority of American companies do want to remain headquartered in America, but with the tax code as it stands, and with obligations to shareholders, there is mounting pressure to consider overseas, lower tax destinations. With this in mind, the time to reduce corporation tax is now. ”
About deVere Group
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of 70 offices across the world, more than 1,200 staff, over 80,000 clients and $10bn under advisement.