...And on Tax inversion

In an economic environment plagued by slow top line growth, companies are seeking to expand their profits and maximize shareholder value by any means necessary. One of such means is corporate inversion; a move which helps corporations seeking favorable tax treatment re-domicile their headquarters in a country with more favorable corporate tax laws like Bermuda or Ireland. In the United States, companies face up to 35% in marginal corporate tax, furthermore, US companies are taxed on profits earned overseas when they try to repatriate those funds. These punitive tax structures entice companies such as Medtronix and Burger King to seek tax haven in less demanding tax environments. The US Treasury Department recognizes corporate inversion as a major problem; even though the act has the effect of increasing corporation’s bottom line and stock prices, it does so at the expense of the tax base on which the US government relies. As such, the Treasury Department has sought action to discourage companies from participating in inversion activities. These measures ensure that it will be far more difficult for U.S. companies to incorporate overseas. These concerns shed light on the much needed corporate tax structure reform, concerns about the inability of legislators to come to an agreement on these issues lead doubters to hold misgiving on the effectiveness of the Treasury Departments. However, what this means for investors is added value for companies who chose to follow the inversion strategy and save on their tax bill.