Corporate inversions are a hot topic in the business world. Walgreen Co. (WAG) AbbVie (ABBV) and Medtronic (MDT) are the latest U.S. companies to take their headquarters abroad in an effort to increase competitiveness and decrease tax bills.
Tim Larson, a partner at Marcum LLP, says that in order to prevent the corporate inversion list from growing longer, serious reform needs to take place. He urges Congress to “take a holistic approach" and look at reformed tax structures “such as territorial taxation (to) realign the U.S. system with most of the G8 countries.”
Larson says the only reason U.S. firms are pursuing such extreme measures is because “corporations are tired of taking a 'wait and see' approach to tax reform.” He adds that “it's not necessarily that companies need to invert. I think many companies have come to look at inversions with strategic acquisitions as a last resort.”
Lawmakers, with support of the White House, have discussed and proposed ways to prevent companies from merging with international companies to take advantage of lower global tax rates.
Senator Dick Durbin of Illinois has submitted a bill that would prevent corporations that have gone through an inversion from being awarded a federal contract. President Obama said he supports the proposal.
Larson tells Yahoo Finance that the real solution to tax inversion is “long-term tax reform.”
"A lot of it comes down to this one thing: wanting to access the global markets in a more competitive fashion," he notes. "So as companies continue to expand overseas, increase their market share, look for assets to acquire, they find themselves in almost a noncompetitive position.”
Shibani Joshi is the creator of www.ShibaniOnTech.com and can be followed on Twitter @shibanijoshi.
More from Yahoo Finance