News Column

Shifting profits

July 15, 2014

Simon Bowers

A corporate inversion occurs when a multinational moves its notional head office, often for tax purposes, to an overseas territory. The impact on operations is often minimal, but such inversions can play an important role in shifting profits within a business to low-tax jurisdictions. Inversions are attractive to US companies making substantial profits beyond American shores. In part, this is because of the US approach to the taxation of multinationals. On the one hand, the tax treatment of such firms has often driven overseas success because it encourages firms to make profits abroad. At the end of last year AbbVie reported $21bn (pounds 12.3bn) of "undistributed earnings" from overseas subsidiaries - funds declared for US tax purposes that would be "indefinitely reinvested" abroad and should thus not be taxed in America. Simon Bowers

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Source: Guardian (UK)

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