Companies Face Flak Over Tax Inversions

 Posted on July 06, 2014 in Taxation Law

Companies that choose to leave the United States in order to take advantage of the more lenient tax laws overseas are facing flak. A new fledgling movement against such practices involves a threat that investors will sell off shares of companies engaging in such tactics.

Tax inversions or the strategy in which companies leave this country for overseas tax havens that are much more lenient, have been used as a money-saving tactic by companies to avoid taxes for several years. Recently, billionaire investor Mark Cuban made it clear that he, for one, was very unhappy with such practices. He tweeted that when companies engaged in such practices, it increased tax shortfall, and that the rest of the country was then required to make up for the tax shortfall, causing the government to increase taxes. He threatened that he would sell off shares in companies that choose to leave the United States for tax havens overseas. He clearly and emphatically recommended that shareholders hold companies accountable, by selling off shares in those companies that choose to move overseas.

Tax inversions are something the White House frown on as well. According to President Obama, companies that perform tax inversions should continue to maintain their presence in this country. They are American companies, and they do enjoy a number of benefits from being an American company. Therefore, it is only fair, that they stay in this country, and pay taxes.

Other high-ranking officials have been equally blunt. Treasury Secretary Jack Lew recently suggested that American companies commit to "economic patriotism." He has proposed a stronger crackdown on tax inversions.