Anti-Inversion Bills Won't Curb Mergers, Camp Says

By Aaron E. Lorenzo  

June 24 — Narrowly written legislation to curb international, tax-driven mergers and acquisitions won't work, House Ways and Means Committee Chairman Dave Camp (R-Mich.) said.

But addressing the issue of inversions more broadly could open the door to overhauling corporate tax laws, he said at an event June 24 at the Heritage Foundation. Bills to raise foreign ownership thresholds to discourage the practice simply won't solve the issue on their own, Camp said in response to a question from the audience.

Lower rates are the solution, Camp said, but he doesn't believe corporate revisions to the U.S. tax code should be done separately from remaking personal tax laws. In short, too many smaller businesses would be left by the wayside because their taxes get filed through the individual side of the code, Camp told Bloomberg BNA.

Anti-inversion bills have been introduced by Sen. Carl Levin (D-Mich.) and Rep. Sander Levin (D-Mich.), the Ways and Means ranking member.

European Developments

Meanwhile, in a step hailed as important in the overall battle to reduce corporate tax base erosion and profit shifting, European Union finance ministers reached unanimous agreement June 20 to revise the EU's Parent-Subsidiary Directive to eliminate double nontaxation.

And, at the same time, the European Commission confirmed that Switzerland has agreed to abide by rules outlined in the EU Code of Conduct against unfair corporate taxation.

After Malta and Sweden blocked the legislation in May at a previous European Council of Economic and Financial Affairs meeting, the two countries lifted their objections, especially relating to proposed rule changes for dealing with hybrid loan arrangements between a parent company and its subsidiary.

“With these revisions, the Parent-Subsidiary directive will remain an important tool in creating a business-friendly environment in the EU without giving unintended opportunities to tax evaders,” European Taxation Commissioner Algirdas Semeta said at a news conference in Luxembourg after the meeting of EU finance ministers concluded. “This is a major step forward in the fight against base erosion and profit shifting.”

To get an agreement on the EU Parent-Subsidiary legislation, Greece—which holds the rotating EU presidency and therefore chairs the EU finance minister meetings—dropped a proposal that would establish a new anti-abuse provision in the law. The terms of the anti-abuse provision will be devised after Italy assumes the rotating EU presidency on July 1.

“Member states’ tax incentives should never be used to lure profits away from where they should rightfully be taxed,” Semeta said. “We must verify that the principles of fair play are not being undermined. We will begin our assessment immediately and expand it further as member states clarify the criteria for certain elements. I remain hopeful that a full evaluation will be delivered by the end of this year.”

Code of Conduct

The agreement to convince Switzerland to adopt the EU Code of Conduct against unfair corporation taxation is an important breakthrough after more than two years of negotiation.

The EU Code of Conduct was adopted initially in the late 1990s and has been an important tool designed to force EU member states to phase out more than 90 different tax schemes originally targeted in the EU member states.

The agreement on the Parent-Subsidiary tax legislation and the deal to get Switzerland to abide by the code of conduct come a little more than a week after European Competition Commissioner Joaquin Almunia launched illegal state aid probes involving three countries: Ireland, for tax arrangements it has with Apple Inc., the Netherlands, involving Starbucks Inc., and Luxembourg, involving Fiat Finance and Trade Ltd.

To contact the reporter on this story: Aaron E. Lorenzo in Washington at aaron@bna.com; Joe Kirwin in Luxembourg at correspondents@bna.com

To contact the editors responsible for this story: Cheryl Saenz at csaenz@bna.com; Brett Ferguson at bferguson@bna.com