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Business in Society Blog

President raises the stakes on “inversion” tax savings when U.S. companies shift hqs abroad.

From the presidential “bully pulpit”: strong condemnation of companies “cherry-picking” nation’s tax laws by moving headquarters to lower-tax countries.

“You shouldn’t get to call yourself an American company only when you want a handout from the American taxpayer”, President Obama declared yesterday.

He was attacking the growing number of American companies rushing to acquire or merge with companies abroad, thereby shifting their “headquarters” to countries with lower corporate tax rates. In doing so, he is leapfrogging Congressional leaders who are considering restrictive legislation on such so-called “inversions”.

Mr. Obama said that such companies are renouncing their American citizenship.

Ironically, with legislation on this issue not likely to be passed soon, more companies are likely to rush to sign such deals.

This crunch issue raises thorny corporate responsibility questions — centrally, the apparent conflict between profitability for shareholders and the interests of many other stakeholders: Pay lower taxes abroad and absorb reputational opprobrium (and potential hits to the brand and soft assets on the balance sheet)?  Tough calls like this are among the rationales for “generous executive compensation”. 

And then there’s the societal context offered by Justice Oliver Wendell Holmes Jr. in 1927:

“Taxes are what we pay for civilized society…”