Hillary Clinton to set out policy to combat tax inversions

US Democratic presidential candidate Hillary Clinton will unveil proposals to deter US companies from shifting profits overseas, including an “exit tax” to penalise firms that perform so-called tax inversions, a campaign official said.

The exit tax would apply to companies such as Pfizer that move abroad for tax advantages, said the official, who did not want to be named, ahead of tomorrow’s official announcement.

Another major part of Clinton’s plan will be announced tomorrow, when she is due to appear in the first-in-the-nation caucus state of Iowa, the official said.

Clinton will also restate her support for raising, to 50% from 20%, the threshold for shares a US company can transfer to a foreign owner to gain tax benefits, said the official.

The Obama administration also backs raising the threshold.

Clinton has said Pfizer’s $160bn (€147.5bn) deal with Allergan — which will move the New York-based drugmaker’s tax address to Ireland — would hurt US taxpayers.

Lawmakers in both parties have cited the deal as the latest example of the need for corporate tax reform in order to block what are known as tax inversions.

In such deals, firms typically will keep their operational headquarters in the US, while being able to use profits previously kept overseas out of the reach of US tax authorities, and lowering their overall rate.

Congressional Democrats have unsuccessfully sought legislation to crack down on inversions since the latest wave began in 2012 by companies including Burger King, Medtronic, and Mylan.

Republicans have resisted, arguing that a broader revamp of the tax code should take priority, though Congress has not made progress.

Republican presidential front-runner Donald Trump, the billionaire real estate mogul, has said Pfizer’s departure “is disgusting” and US politicians “should be ashamed”.

The US has the highest corporate tax rate in the developed world, at 35%.

As the race for the White House hots up, tax inversions have raised the hackles of US lawmakers.

The US treasury wrote to lawmakers, last month, saying it would soon take measures to suppress future tax inversions.

Here, Finance Minister Michael Noonan recently rejected suggestions that the Pfizer/Allergan tie-up would throw Ireland’s low corporate tax rate back into the world’s spotlight.

Bloomberg and Irish Examiner staff