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Companies Move Overseas to Avoid Taxes

Money 2(CNN) — You do everything you can to pay lower taxes, and American companies do it too, and more are moving overseas to avoid the taxman.

A new report finds 47 companies have used an “inversion” process over the past 10 years so they can pay lower taxes.

Compare that to just 29 companies during the previous two decades.

Inversion isn’t just setting up shop in the Cayman Islands or Bermuda and changing an address.

First, a company has to merge with another company in a lower-tax country. Then it has to do at least a quarter of its business overseas or give the owners of the foreign company at least one-fifth ownership of the newly merged company.

We see this in the headlines a lot. Just a few weeks ago, U.S. medical device giant Medtronic bought its rival, Covidien.

Covidien is based in Ireland, where the corporate tax rate is 12.5 percent. Compare that to the 35 percent U.S. corporate tax rate, one of the highest in the world.

And all of this is perfectly legal, although American companies are certainly criticized for doing it.

Michigan Democrat Sander Levin says corporate inversions cost the U.S. billions of dollars and undermine vital domestic interests. He’s pushing for tighter rules. But whether that goes anywhere in this Congress remains to be seen.

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