As we’ve discussed previously, we don’t know how this is considered acceptable behavior. Are the shareholder pressures on Walgreen Co. really so intense that the board would consider this drastic move to shave a few pennies off of their operating costs? Really? Maybe they should look to fire management, and find more competent oversight. Oh wait, Walgreen Co. CEO Greg Wasson was paid $13,700,000 last year. How about returning some of that to shareholders instead? Not to mention, per Walgreens “Net earnings for fiscal 2013 ended Aug. 31 determined in accordance with GAAP were $2.5 billion”. I guess that’s not enough. More, more, more…
The nation’s largest drugstore chain is considering a move that would allow it to significantly cut its tax bill and increase profits. But it’s being painted by critics as un-American for looking to make money for shareholders through financial engineering at the expense of the communities that it grew up in. Walgreen is considering a so-called corporate tax inversion, in which an American company is able to incorporate abroad by acquiring a foreign company. The buyer, in effect, becomes a subsidiary of a foreign parent.
The average person who pays taxes cannot take advantage of the tax loopholes exploited by corporations, and they don’t think it’s fair, said Klaus Weber, associate professor of management and organizations at Northwestern University’s Kellogg School of Management.
“I do think people now more than before care because of rising issues of income inequality and justice and the fact that large companies have come under more scrutiny,” Weber said. “People expect corporations to fulfill their citizen duties as taxpayers like everyone else.”
While several U.S. companies have moved to lower-tax countries since 2012, Walgreen has caught the attention of taxpayer groups and unions that have criticized the potential tax maneuver. They have blasted Walgreen for contemplating fleeing the United States even though it benefits from government insurance programs. Nearly one-quarter of Walgreen’s $72 billion in sales in its last fiscal year came from Medicaid and Medicare, according to a report by Americans for Tax Fairness and Change to Win Retail Initiatives, a union-backed group.
“It is unconscionable that Walgreen is considering this tax dodge — especially in light of the billions of dollars it receives from U.S. taxpayers every year,” Nell Geiser, associate director of Change to Win Retail Initiatives, said in a statement. “Walgreen should show its commitment to our communities and our country by staying an American company.”
(click here to continue reading Walgreen considers headquarters move – chicagotribune.com.)
Walgreen Co. is busily calculating the cost of moving corporate infrastructure, relocating executives and staff, and the very real risk of losing their Medicaid/Medicare cash cow, not to mention the also very real risk of consumer boycott to save a few percentage points of tax revenue. Sleazy, no? And ironic, since Medicaid and Medicare is responsible for about 21% of our national budget. Why should Walgreen’s get any of taxpayer money for it when they refuse to pay in?
Would shareholders care if Walgreen Co. was kicked out the the S&P 500? Probably, but Walgreens executives will get handsomely paid either way.
[The CtW Investment Group] said an inversion could hurt Walgreen’s stock price.
“Reincorporation carries risk of removal from the S.&P. 500 and other stock indices,” it said, citing the examples of Ace and Transocean, which were removed from the index after they moved to Switzerland. It added that some investors like big pension funds could be required to sell shares of the company if it were not included in the S.&P. 500-stock index.
If Walgreen reincorporated in Switzerland, where Alliance Boots is based, the influence of shareholders could be diminished, CtW said. Swiss law gives shareholders less protection, CtW said, making it harder for investors to seek remedies through courts in the event of fraud or a dereliction of board duties.
CtW also said it was sensitive to the brewing political debate about inversions. In recent months, several senators and President Obama have proposed legislation that would curtail the practice. No new laws are yet in place, but there is a belief on Wall Street that the window for such deals could close soon.
“In addition to the concerns outlined above, we fear that there could be political and reputational risks following an inversion, which would pose a clear contradiction with Walgreen’s quintessentially American brand,” CtW wrote. “Accordingly, we strongly urge you to end the controversy over Walgreen’s potential
(click here to continue reading Walgreen Shareholder Opposes Potential Deal to Reincorporate Abroad – NYTimes.com.)
Senator Dick Durbin is troubled by this cowardly plan as well:
As Walgreen Co, the largest U.S. drugstore chain, edged closer to potentially moving its tax home base abroad, the senior U.S. senator from its home state said on Wednesday that he hoped the company would not take such a step.
Illinois Democrat Richard Durbin told Reuters in an interview that he spoke with a Walgreen lobbyist on Tuesday. “I told him I hope that the rumor’s not true,” Durbin said.
Durbin, the Senate’s second-highest ranking Democrat, said Walgreen, now based in a Chicago suburb, would be ill-advised to pursue an “inversion” deal with Switzerland’s Alliance Boots Holding Ltd.
“Because of their national reach, they are a uniquely American company, and I think it would really hurt their image if they decided to give up on this country and to head overseas to make a couple extra dollars,” he said.
(click here to continue reading Exclusive: U.S. senator warns as Walgreen weighs overseas tax deal | Reuters.)
and despite the Patriot Employer Tax Credit Act bill having a slim chance of passing through the reactionaries in the US House, Sen. Durbin is at least trying:
Sen. Richard Durbin said Monday he will introduce legislation this week that would close tax loopholes for corporations that take jobs out of the country.
Durbin announced the “Patriot Employer Tax Credit Act” at Wheatland Tube in the Back of the Yards neighborhood. He plans to introduce the measure Thursday, a spokeswoman said.
The proposal would give tax credits to companies “that provide fair wages and good benefits to workers while closing a loophole that allows corporations to claim tax savings for activities such as building a manufacturing plant overseas,” according to a news release from Durbin’s office.
To qualify for the credits, a company must maintain its corporate headquarters in the U.S., maintain the same number or increase the number of U.S. workers compared with the number overseas and provide health insurance benefits that comply with the Affordable Care Act.
(click here to continue reading Durbin bill would close tax loopholes for corporations sending jobs overseas – chicagotribune.com.)