WASHINGTON - Ways and Means Committee Ranking Member appeared on Bloomberg TV’s Market Makers this morning to discuss Medtronic’s acquisition of Ireland-based Covidien. Rep. Levin last month introduced the Stop Corporate Inversions Act of 2014, legislation to tighten the rules to prevent corporate inversions.
***WATCH VIDEO***
ON CORPORATE INVERSIONS
“Essentially, companies are keeping major operations here and they are combining, but doing that in order to pay fewer taxes by essentially setting up the domicile in other places. I think we need to very seriously look at the inversion issue. My brother and I have introduced legislation to do just that. It is interesting. Apparently, in the contract between the two companies, they indicate their deal is off if Congress acts. I think that shows that the basic purpose of this combination is related to taxes and not the other aspects of their operations. This is an effort to lower their tax rate."
ON THE NEED TO TIGHTEN INVERSION RULES AND MAKE U.S. MORE ATTRACTIVE FOR COMPANIES
“I think you have to do both. You have to have tax reform. You also want to make it more attractive. But you also don't want companies to leave the U.S. and simply change their domicile in order to pay lower taxes. We could have a lower tax, but still Ireland would be lower. And companies would continue to invert. And keep their operations -- their major operations -- in the U.S. you don't want to do things that will hurt the tax structure of this country, and also hurt the effort of companies that are basically American companies to stay here. Remember, Medtronic uses the R&D tax credit in this country, a rather significant one. We do not want companies to move their headquarters overseas, while retaining all of the benefits they get from being an American company. R&D is just one of them. They get other benefits from being here. You should not simply say to them, ok, change where you are located, pay much lower taxes, or you maintain the benefits of being essentially an American company."
ON THE IMPACT OF CORPORATE INVERSIONS ON U.S. ECONOMY
“There is a benefit [for shareholders to] moving overseas, but that has a major impact on the economy of this country. Shareholders have a stake in the structure that American companies not only essentially keep their roots here, but also do not essentially move overseas in name in order to pay lower taxes. That has all kinds of economic consequences for the U.S. and our economy. We need to look at this. We are going to meet with Medtronic in a few minutes, with some of their officials, to discuss this. That is what is going on. I think Democrats and Republicans should join together and say, look, this is an issue, and we need to deal with it, and deal with it effectively. And that is why we have introduced this legislation."
ON MEETING WITH MEDTRONIC OFFICIALS
“We need to discuss with them why they are doing this and what their plans are. They say they are going to invest more in the U.S., essentially by moving overseas. But we have to remember that unless we have a tax structure that makes sense -- if companies can simply invert and move their name overseas, it will have an impact on this country in the long run as well as the short run. We want to sit down and ask them why they are doing this. And also, I would like to ask them why they have a provision in the contract between the two countries that if this legislation is passed, the deal is off."
ON THE NEED FOR COMPREHENSIVE TAX REFORM
“Chairman [Camp] and I set up some working groups. Democratic and Republican members sitting down to discuss different aspects of tax reform. But then Chairman Camp and Republicans in the House decided to go their own way. And we were not involved in the putting together the tax reform package after those initial working groups. We said to him very clearly, and to all of the Republicans, you have to do this on a bipartisan basis to make tax reform work. They decided to do it otherwise. I am more than willing, and anxious to continue this effort of bipartisan tax reform. But they made the decision to go it alone, and as a result they have a package that is not even acceptable within their own ranks."
ON PASSING THE STOP CORPORATE INVERSIONS ACT OF 2014
“I think these two bills have helped to spotlight that this is an issue that needs to be seriously addressed. And by the way, the package that Chairman Camp put together does not address the whole problem of these companies changing to essentially lower their tax rates. We need to look at that, and these bills are intended to open up the subject. We need to question as we did with Pfizer. It was different than this one. I'd acknowledge that. You have to look at each of these seriously."
