As more and more giant American corporations try to dodge U.S. taxes by moving overseas, Sen. Bernie Sanders on Friday, July 25, announced legislation to ban those businesses from receiving lucrative U.S. government contracts. Sanders said that he will file an amendment to a Department of Defense authorization bill to prohibit the U.S. government from awarding federal contracts to companies that reincorporate overseas to avoid paying U.S. income taxes. “I have a message for these corporate deserters: You can’t be an American company only when you want corporate welfare from American taxpayers or you want lucrative contracts from the federal government. If you want the advantages of being an American company then you can’t run away from America to avoid paying taxes.”
Sanders announced the legislation on the same day pharmaceutical giant AbbVie said it plans to take over Shire, its European rival, in a merger that would allow the Chicago-based drug maker to reincorporate in Britain and lower its effective U.S. income tax rate from 22 percent to just 13 percent by 2016.
Walgreen’s, the giant drugstore chain, recently announced that it is considering moving its corporate headquarters from the U.S. to Switzerland to avoid $4 billion in U.S. taxes over the next five years. According to a recent report from Americans for Tax Fairness, nearly a quarter of Walgreen’s $72 billion in sales last year came from Medicare and Medicaid.
At least a dozen other major companies are considering abandoning America through a loophole in the tax code known as corporate inversion. Such inversions allow U.S. companies to move their corporate headquarters overseas by merging with a foreign company in a low-tax country, even though most of their profits and sales occur in America.
Sanders last year introduced the Corporate Tax Dodging Prevention Act (S.250) that would prohibit these companies from receiving tax breaks by shifting their headquarters to the Cayman Islands and other offshore tax havens. That bill would also stop rewarding companies that ship jobs and factories overseas with huge tax breaks. The Joint Committee on Taxation has estimated in the past that the provisions in this bill will raise more than $590 billion in revenue over the next decade. Nearly two-thirds of the companies who have established subsidiaries in tax havens have registered at least one in Bermuda or the Cayman Islands, according to a June 2014 report from Citizens for Tax Justice.
Companies that have received billions in corporate welfare and have made billions in profits should not be allowed to renounce their U.S. citizenship to avoid paying U.S. taxes,” Sanders said.