Tags: Krugman | tax | inversion | company

Krugman: Companies Doing Tax Inversion 'Shirking Their Civic Duty'

By    |   Monday, 28 July 2014 10:51 AM

Debate is raging among those who think corporate tax inversion mergers should be banned and those who don't. Count Nobel laureate economist Paul Krugman in the former camp.

In the inversion deals, a U.S. company purchases a foreign one and then domiciles in the foreign country to avoid U.S. corporate taxes, which run as high as 35 percent.

"We're heading toward a world in which only the human people pay taxes," Krugman writes in The New York Times. The government now receives 10 percent of its revenue from taxes on corporate profits, down from 33 percent about 60 years ago.

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As for the U.S. companies executing inversion deals, "they're shirking their civic duty," Krugman says. These companies are dodging taxes on profits earned domestically, he writes.

Many opponents of a ban against inversion favor broad corporate tax reform instead. Reform is a good idea, Krugman says. "But the case for eventual reform basically has nothing to do with the case for closing the inversion loophole right now."

It could take years for Congress to reach agreement on tax reform, he writes. "Why let corporations avoid paying their fair share for years, while we wait for the logjam to break?"

For investors looking to profit from the inversion trend, The Wall Street Journal offers three suggestions.

1. Sector-focused funds. Much of the inversion activity has taken place in the healthcare sector. So you can buy a mutual fund or exchange-traded fund focusing on that industry.

2. Merger arbitrage funds. These are mutual funds that buy and sell stocks specifically to profit from mergers by betting on the outcome of announced transactions.

3. "Going a la carte." You can buy the shares of potential targets and of potential acquirers that would benefit from a deal.

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Economy
Debate is raging among those who think corporate tax inversion mergers should be banned and those who don't. Count Nobel laureate economist Paul Krugman in the former camp.
Krugman, tax, inversion, company
316
2014-51-28
Monday, 28 July 2014 10:51 AM
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