A growing number of U.S. companies are looking to trim their tax bills by combining operations with foreign businesses in a trend that may eventually cost the federal government billions of dollars in revenue.
Generic drugmaker Mylan Inc. said Monday it will become part of a new company organized in the Netherlands in a $5.3 billion deal to acquire some of Abbott Laboratories’ generic-drugs business. The deal is expected to lower Mylan’s tax rate to about 20 percent to 21 percent in the first full year and to the high teens after that.
The Canonsburg, Pennsylvania-company’s deal follows a path explored by several other U.S. drugmakers in recent months. AbbVie Inc. has entered talks with Shire Plc. over a roughly $53.68 billion deal that would lead to a lower tax rate and a company organized on the British island of Jersey.
But drugmakers aren’t the only companies looking overseas for better tax deals.
Last month, U.S. medical device maker Medtronic Inc. said that it had agreed to buy Ireland-based competitor Covidien for $42.9 billion in cash and stock. The combined company would have executive offices in Ireland, which has a 12.5 percent corporate income tax rate. And drugstore chain Walgreen Co. – which bills itself as “America’s premier pharmacy” – also is considering a similar move with Swiss health and beauty retailer Alliance Boots.