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U.S. NEWSThursday 7 April 2016
AP: Experts believe corporate tax
inversions may survive new rules
In this photo, Halliburton Chairman, President and CEO David Lesar, third from right, rings the New TOM MURPHY paying additional taxes
York Stock Exchange opening bell. The Justice Department is suing to stop Halliburton from buy- AP Business Writer that the U.S. government
ing oilfield-services rival Baker Hughes, the latest effort by the Obama administration to block President Obama scored would impose on money
mergers that it believes enrich corporations but hurt consumers. a victory this week when earned overseas and
Pfizer scrapped a $160-bil- then transferred back to
(AP Photo/Richard Drew) lion overseas deal that the parent.
would have kept a chunk They can reduce corpo-
Federal suit filed to stop Halliburton deal of the drugmaker’s profits rate tax liability in other
beyond the U.S. tax man’s ways, and they provide
ERIC TUCKER second-biggest services of their value. reach. some relief from the U.S.
DAVID KOENIG company in the oil busi- Assistant Attorney General But recent, aggressive corporate tax rate of 35
Associated Press ness and Baker Hughes Inc. Bill Baer, head of the Justice federal actions that dis- percent, which is the high-
WASHINGTON (AP) — The is third. Combining them Department’s antitrust divi- couraged Pfizer Inc.’s est in the industrialized
Justice Department is su- would create a duopoly sion, said oilfield services is combination with another world.
ing to stop Halliburton from with market leader Schlum- a cyclical business and its drugmaker, Allergan PLC, But Obama and others
buying oilfield-services rival berger Ltd., the Justice De- companies grow and shrink won’t stop all so-called in- have said these deals
Baker Hughes, the latest ef- partment said. with market conditions. “It’s versions, or deals that end shortchange the country
fort by the Obama admin- Halliburton and Baker not a justification for an with a company relocat- because corporations fail
istration to block mergers Hughes countered in a anticompetitive merger to ing to another country — to pay their fair share of
that it believes enrich cor- joint statement that their say, ‘We’re not doing as at least on paper — and taxes.
porations but hurt consum- deal would improve com- much business as we used trimming its U.S. tax bill in Earlier this week, the
ers. petition by creating a more to,’” he said. the process. Treasury Department an-
The government argues flexible, innovative services Halliburton has proposed Tax and legal experts say nounced a third round
that the $35 billion deal company. spinning off billions of dol- these deals, which have of regulations designed
would lead to higher prices “The transaction will pro- lars in assets to get the deal come under growing criti- to limit the practice and
and less innovation in the- vide customers with access approved — it could owe cism from politicians, will make it less lucrative for
business of helping energy to high quality and more Baker Hughes a $3.5 bil- remain attractive to some companies.
companies drill for oil and efficient products and ser- lion breakup fee if the deal companies until the U.S. The new regulations seek,
gas. vices, and an opportunity fails. Baer dismissed the of- pursues a massive tax law among other things, to
The Justice Department to reduce their cost per fer, calling it a “grab bag” overhaul. limit inversion benefits like
filed a lawsuit in federal barrel,” the companies of the companies’ less- “There may be a tempo- tax deductions that can
court in Delaware, charg- said. valuable holdings. rary respite from inver- stem from internal corpo-
ing that the deal would The companies announced Last year saw a record of sions, but the large finan- rate borrowings.
eliminate head-to-head their plan to combine in more than $5 trillion in cor- cial benefits ... are still Pfizer cited the new regu-
competition in 23 markets November 2014, shortly af- porate mergers and take- there,” said Bret Wells, a lations in scuttling its deal.
for products and services ter oil prices began to fall overs, topping 2007 as the tax lawyer and law pro- These rules will make it
including drill bits, fluids and due to a global oversup- biggest year ever for deals, fessor at the University of harder for U.S. compa-
expertise in drilling horizon- ply of crude. The glut has according to Dealogic. Houston. nies to find a foreign deal
tal wells. Those and other slowed demand for drilling Speaking to antitrust law- Even the Obama admin- partner, said Donald
innovations have helped services. Both companies yers in Washington, Attor- istration, which has taken Goldman, a professor at
spur a renaissance in U.S. have laid off thousands of ney General Loretta Lynch several steps to discour- Arizona State University’s
energy production. workers, and their shares said the deals are also big- age inversions in recent W.P. Carey School of Busi-
Halliburton Co. is the world’s have lost about one-third ger and more complex. q years, says Congress ulti- ness. He added that the
mately must step into this regulations “will definitely
fight. have a chilling effect on
In an inversion, a U.S. cor- inversions.”
poration and a foreign They actually will come
company combine into a close to killing the prac-
parent company based tice, according to Rob-
in the foreign country. ert Willens, president of a
For tax purposes, the U.S. New York-based tax and
company becomes for- accounting service and
eign-owned, even if all a former Lehman Brothers
the executives and oper- managing director.
ations stay in the U.S. But he said some narrowly
Inversions have become tailored deals that have
particularly popular in the right balance of U.S.
health care. They al- and foreign ownership
low companies to avoid should survive.q
