Walgreen plans to keep its roots firmly planted in the United States, saying it will no longer pursue an overseas reorganization that would have trimmed the amount of U.S. taxes it pays.
The nation’s largest drugstore chain said Wednesday that, as previously planned, it will buy the remaining stake in Swiss health and beauty retailer Alliance Boots that it does not already own.
It will not pull off an inversion, however, a tactic that has become increasingly popular with U.S. companies seeking tax relief, but which has sparked a backlash in Washington and among the public.
There have been 47 U.S. companies that have, through tie-ups with foreign businesses over the past decade, created inversion schemes, according to the Congressional Research Service.
Several others are planning or considering the move.
After exploring a tax inversion strategy, Walgreen said that it was not confident that the structure of the deal could withstand IRS scrutiny.
At the same time, there is an intensifying pushback from Congress and President Barack Obama due to lost U.S. revenue from corporate taxes from inversions.
And on Tuesday, the Treasury Department said that it was considering actions that could limit the ability of companies to use the tactic.
In an inversion a U.S. company reorganizes in country with a lower tax rate by acquiring or merging with a company overseas. Companies are seeking some relief from the U.S. corporate tax rate of 35 percent, which is the highest in the world. Inversions also allow them to avoid paying taxes on income they transfer back the parent company from overseas, and they can reduce the U.S. corporate tax liability in other ways as well.
Walgreen Co. had drawn criticism for considering an inversion, in part because it receives a portion of its revenue through government funded programs that help cover the sick and elderly people. The company addressed that issue Wednesday.
“The company also was mindful of the ongoing public reaction to a potential inversion and Walgreens unique role as an iconic American consumer retail company with a major portion of its revenues derived from government-funded reimbursement programs,” Walgreen Co. said in a statement.
Walgreen shares sank more than 6 percent, or $4.22, to $64.90 before markets opened Wednesday.