Medtronic Says New Inversion Rules Won't Hurt Finances
April 06 2016 - 9:53AM
Dow Jones News
By Anne Steele
Medtronic Inc. on Wednesday said the Treasury Department's new
proposed tax regulations on inversion deals won't have a material
financial impact on the medical supply company, which moved its
corporate address abroad in a deal last year.
In January 2015, Metronic closed a $43 billion acquisition of
Ireland's Covidien PLC, combining two of the world's largest
medical-supply companies. Medtronic, formerly based in Minneapolis,
redomiciled in Ireland upon completion of the merger, part of a
wave of controversial deals aimed at taking advantage of lower
corporate-tax rates overseas.
Medtronic said Wednesday that the acquisition "was undertaken
for strategic reasons and has created a company that is positively
impacting the lives of more patients, in more ways and in more
places around the world."
On Monday, the Treasury Department imposed tough new curbs on
corporate inversions, making it harder for companies to move their
tax addresses out of the U.S. and then shift profits to low-tax
countries using a maneuver known as earnings stripping.
The new rules -- the government's third wave of administrative
action against inversions -- shocked Wall Street and forced Pfizer
Inc. and Allergan PLC to terminate their planned $150 billion
merger, which was on track to be the biggest deal of its kind.
The Treasury's regulations would limit what is known as earnings
stripping, a practice that follows many inversions and other
cross-border acquisitions that helps lower companies' effective tax
rates.
Inverted companies -- in fact, all non-U.S.-based companies --
can lend money to their U.S. subsidiaries. Those moves create
deductible interest in the U.S., reducing the income subject to the
35% U.S. corporate tax rate and shifting income to a lower-taxed
jurisdiction. If a U.S.-based company tried the same technique by
borrowing from its offshore subsidiaries, the government would tax
that income at the U.S. rate.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 06, 2016 09:38 ET (13:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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