Medtronic Has Biggest Stash Of Offshore Cash Among Inverters
Medical device giant Medtronic Inc. leads all corporate inverters in the amount of offshore cash waiting to be tapped if their tax inversion deals are consummated.
Medtronic is buying Covidien and moving to Dublin, and it has $13 billion of cash outside the United States, according to a report from the Financial Times, which cited data compiled by Moody’s. Pharmaceutical firm AbbVie — a company that is acquiring Irish company Shire — has $5.1 billion in offshore cash, while semiconductor and device components technology supplier Applied Materials — set to re-domicile in the Netherlands — has $2.4 billion in cash overseas. Drugmaker Mylan has $174 million stashed offshore.
Other sources have also disclosed that billions of dollars in cash are being stashed overseas by some of the major players in the healthcare and medical device industry. Medtronic also features prominently in another list, as summarized in a previous Med Device Online article.
Per a study by U.S. Public Interest Research Group Education Fund and the Citizens for Tax Justice, the following companies are holding cash in offshore subsidiaries:
- Medtronic: $20.5 billion in 37 subsidiaries
- Baxter International: $12.2 billion in 12 subsidiaries
- Boston Scientific: $11.9 billion in 42 subsidiaries
- 3M: $9.7 billion in 12 subsidiaries
- Stryker: $7 billion in 38 foreign subsidiaries
- Becton Dickinson: $4.4 billion in 38 subsidiaries
- St. Jude Medical: $3.6 billion in 10 subsidiaries
According to a recent CNN report, the following companies are also holding a substantial amount of funds offshore:
- Apple: $111.3 billion
- General Electric: $110 billion
- Microsoft: $92.9 billion
- Pfizer: $69 billion
- Merck: $57.1 billion
- IBM: $52.3 billion
- Johnson & Johnson: $50.9 billion
Tax inversion allows American companies to acquire a smaller, foreign target and move its tax base to the acquired company’s country. Medtronic claims that their merger with Covidien is not meant to dodge tax obligations — claiming that inversion will only shave 1 to 2 percentage points from the current 18 percent tax rate it pays the U.S. government, per the FT report. Other companies in the process of inverting have also downplayed the effect of inversion on their corporate tax liabilities, which could be up to 35 percent under present laws, but U.S. lawmakers continue to protest adamantly.
A raft of bills to put a stop to the controversial practice is already being considered in Congress.
“We need to move quickly and aggressively to curtail inversions and prevent companies from using shady accounting practices to avoid their US tax obligation,” Chuck Schumer, a senior Democratic senator, told FT.
But with the mid-term elections in November fast approaching, a potential resolution of the tax reform issue can be drowned amid competing rhetoric between politicians.
According to a separate FT article, “Corporate America is broadly in favor of Congress passing a comprehensive set of tax reforms — including action on inversions — via new legislation, but the chances of Democrats and Republicans agreeing to do so in the near future are slim.”
“The issue is very technical, but for voters it can be a simple matter of corporations [that] don’t want to contribute to the society that birthed them or the Americans that built them,” Jeff Hauser, spokesman for the American Federation of Labor and Congress of Industrial Organizations, told the Pittsburgh Post-Gazette.