Inversions merely crystalise America's critical dilemmas

New Brunswick

THE US presidential election campaign triggers debate every four years over offshoring, outsourcing and tax-avoidance schemes by corporations. This year is no exception, and the issue of "inversions" - companies moving their headquarters abroad to reduce taxes - has candidates from both parties crying foul. The issue highlights the negative consequences of globalisation and serves as an effective battle cry to rally voters. A closer look shows why this is a visceral political issue even though the economic impact is less than meets the eye.

In simple terms, an inversion is when a US company shifts corporate headquarters to a country such as Ireland where corporate taxes max out at 12.5 per cent, as compared to the maximum 35 per cent US tax rate, not including additional taxes imposed by states. For large multinational firms, the annual savings for companies - and lost tax revenues for the government - can be in the billions.