Tax inversion
As of June 2019[update], there have been no material US inversions post-2017, and notably, two large Irish-based tax inversion targets were acquired in non-tax inversion transactions, where the acquirer remained in their higher-tax jurisdiction: Shire plc by Japanese pharma Takeda for US$63 billion (announced in 2018, closed in 2019), and Allergan plc by U.S. pharma AbbVie for US$64 billion (announced in 2019, expected to close in 2020); in addition, Broadcom Inc. redomesticated to the United States.
The largest completed corporate tax inversion in history was the US$48 billion merger of Medtronic with Covidien plc in Ireland in 2015 (the vast majority of their merged revenues are still from the US).
The largest aborted tax inversion was the US$160 billion merger of Pfizer with Allergan plc in Ireland in 2016.
[56] A number of studies have shown that the after-tax returns to original company shareholders post-inversion are more mixed, and often poor: In 2017, the US Congressional Budget Office (CBO) stated that it only considered a transaction to be a tax inversion under the following conditions:[62] In all definitions, the executive management (e.g. CEO, CFO), and the substantive offices and assets of the company, can remain in the US.
[69] In 2018, academics identified a new class of tax inversion as details of Apple's Q1 2015 leprechaun economics transaction in Ireland emerged.
However, Apple's 2015 BEPS transaction to Ireland was the first time a US corporation moved a substantial amount of IP to a full OECD jurisdiction where it already had a "substantive business operations".
[80] In February 2019, Brad Setser from the Council on Foreign Relations, wrote a New York Times article highlighting issues with TCJA in terms of combatting power of BEPS tools.
[81] In 2017, the Congressional Budget Office reported that of the 60 US tax inversions from 1983 to 2015 which the CBO officially recognize, over 40% came from three industries: Pharmaceutical preparations (9), Fire, marine, and casualty insurance (7), and Oil & Gas Well Drilling and Servicing (7).
[4] These US companies that inverted in these two industries shared the common attributes of having mostly international client bases, and of having assets that were easily "portable" outside of the US.
The assets of the Oil & Gas corporate tax inversions were already mostly held in securitization vehicles often legally located in offshore financial centres.
Similarly, the assets of the Casualty Insurance corporate tax inversions were also mainly global reinsurance contracts that were also legally located in offshore financial centres.
[82] The US Life Sciences industry (Pharmaceutical and Medical Devices) became a significant part of the second wave of US tax inversions from 2012 to 2016.
[84] An important concept in inversions are the tools required to shift untaxed profits from the corporate's existing operating jurisdictions to the new destination.
Bloomberg used this data to identify the most attractive destinations for US inversions titled Tracking the Tax Runaways which won the 2015 Pulitzer Prize for Explanatory Reporting, and was updated to 2018.
These inversions involved mergers with real companies that met the "substantial business activities" test of IRS Section 7874.
[29] In 2014 the U.S. Treasury effectively blocked AbbVie's attempt to execute a tax inversion with Irish-based Shire plc.
