Abbott deal highlights inversion inaction
Political furor over the recent spate of tax inversions is having little influence on how the government chooses its partners. Crain's Chicago Business says the recent $19.5 billion Defense Department deal with Abbott to develop brain injury diagnostics shows that anger about changing an address to avoid taxes amounts to little more than posturing.
Reporter Joe Cahill notes that although Abbott has not inverted (it has used a "spinversion" to achieve a similar result with its Mylan deal creating a freestanding off-shore business interest which does not have to tangle with US tax requirements), the DOD could have opted not to contract with a company that is looking for US business benefits without paying for them.
Cahill writes that President Barack Obama “conceivably could order federal agencies to shun companies that reincorporate overseas for tax purposes. That would be a dramatic step.”
There have been proposals to deter inversions, such as one by Treasury Secretary Jacob Lew, to discourage relocations in which the tax address changes but the staff does not. Such efforts may not make much of a dent: a defense industry analyst tells Crain's that the fuss currently amounts to noise, because contracts are granted based on the best prices, product performance, and compliance with procurement rules.