Could Big Corporate Mergers & Tax Inversions Be Fading Out?

August 7, 2014
The corporate landscape has shifted a bit this week with no-go mergers and tax inversions.

The corporate landscape has shifted a bit this week with no-go mergers and tax inversions.

The corporate landscape is not always extremely stable. Large corporations fold up, small businesses make it big, companies merge, and so much more goes on each and every day in the business world. Some recent trends this week have been a perfect representation of these changes. But some experts believe they may be a larger part of a shift in the corporate environment.

2 Major Corporate Mergers a No-Go

During the first half of 2014, corporate mergers were at their highest level since 2007. The annualized merger pace was running at $1.5 trillion. So who would have thought that a few historic and highly publicized deals on corporate mergers would have completely fallen apart?

Just this year, Fox was on the brink of merging with Time Warner, while Sprint had T-Mobile in its sights. These major corporations were on the brink of merging for a variety of reasons, including the popular benefits of tax inversion. However, the plug was pulled on both of these deals this week, which surprised many experts and bucked the trend that had seemed to be on the rise in recent years.

Tax Inversion Deal Nixed

Also this week, the American pharmacy chain Walgreens announced that it will acquire an ownership stake in Europe-based pharmacy chain Alliance Boots. But, as part of the agreement, the company is not moving its tax base to the United Kingdom or Switzerland through a tax inversion deal that many expected. Economists say the corporate giant could have saved over a billion dollars over the next 5 years if it had made this tax inversion move.

Tax inversion deals have been a big trend recently as corporate entities try to find ways to reduce their IRS business tax liabilities through tax avoidance maneuvers. One way to do this is to move a company’s headquarters and, therefore, tax base out of the country to a foreign-based office or location. Because the federal U.S. tax code currently requires taxes to be levied on foreign-generated income for American-base companies, many corporations have found it beneficial to relocate their headquarters abroad to an area with a lower corporate tax rate.

The business landscape is constantly evolving. While these recent headlines have raised the eyebrows of many worldwide, it remains unknown whether these will be future trends, or if they are simply outliers in the overall numbers game.

To learn more about the IRS business taxes involved in running a corporation like an S corp or C corp, along with strategies to reduce your corporate tax bill,contact the accounting experts at 1-800Accountant today. Call 1-800-222-6868 or visit www.1-800Accountant.

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