Market Observations

[Gman]

I was reading a fine example of what happens when our government tries to play with business through the disincentives of taxation just yesterday;
Walgreens may be next big firm to 'move' overseas

Seagate Technology, inventor of 5.25-inch hard disc drive, is a Silicon Valley company, right? Er, no, actually it's Irish.

Jazz Pharmaceuticals, the Palo Alto developer of a host of new drugs, is also an Irish company.


Applied Materials, the 37-year-old semiconductor, equipment and solar company in Santa Clara, is about to turn Japanese.


All three have undergone a "corporate inversion," also known as a "tax inversion," whereby a business acquires an overseas company, switches official tax domicile to the overseas country, and - voila! - no more U.S. taxes on overseas earnings.


"They are, in effect, renouncing their U.S. citizenship to cut their tax bill," noted Max Baucus, former chairman of the Senate Finance Committee, in 2002, just after U.S. companies including Tyco International and Ingersoll-Rand undertook highly publicized inversions in the 1990s.


Now we have Walgreens, about to complete its multibillion-dollar purchase of European drugstore chain Alliance Boots, and perhaps magically become a citizen of Switzerland, as shareholders want. "We're looking at all and everything" in connection with the acquisition, Walgreens CEO Craig Wasson said on an earnings call last week, including "what the structure could do as far as our effective tax rate."