One of the hottest strategies in corporate America right now is the use of so-called "tax-inversion" deals.
The concept is simple. A US company buys a company headquartered in a country with lower taxes (like Ireland or the UK) and then re-incorporates the entire company in that country to reduce the corporate tax bill.
A major tax inversion was announced yesterday, with Illinois-based pharmaceutical company AbbVie buying Irish-based Shire Pharmaceuticals. The entire company will be registered in Jersey, the island in the English Channel, which is famous for its low tax status.
Rumblings about these deals are growing in Washington. This chart from Goldman Sachs explains why: The strategy is exploding right now.
As you can see, there have been anti-inversion laws passed in the past. The 2004 one specified on the chart prevented intra-company inversions (inversions without deals), according to Goldman.
But given the massive explosion in this new kind of deal, Goldman thinks it could provide a spur, after the midterm elections, to reform corporate taxes and prevent these kinds of deals.
See Also:Another Billion-Dollar US Company Just Moved Across The PondThese Are The Most Religious Places In The World — And What They're PracticingHere's How Newspaper Front Pages Around The World Are Covering The Malaysia Plane Crash
SEE ALSO: Another billion dollar company just went across the pond