Mergers abroad cuts corporate taxes in US firms - report

By Rizza Sta. Ana

Oct 09, 2013 10:19 AM EDT

A trend in American companies consolidating with foreign companies and moving abroad had been seen rising recently. Executives of Applied Materials, who had acquired Japan's Tokyo Electron, highlighted the fact that the best benefit that the company availed so far would be the lowered taxes. The merger resulted to a drop of the company's effective tax rate from 22% to 17%. Applied Materials would stand to save USD100 million annually based from its USD2 billion profit.

Tax department partner Andrew Short at Financial advisory services firm Paul Hastings said, "It's almost like the holy grail. We spend all of our time working for multinationals, thinking about how we're going to expand their business internationally and keep the taxation of those activities offshore."

Companies had started to do multibillion-dollar cross-border mergers and acquisitions abroad to circumvent inversions. Inversion is a process of reincorporating in areas like Bermuda and Ireland who imposes low corporate tax rates.

Tax Analysts chief economist Martin Sullivan said, "These companies are doing the math and seeing they can save a couple hundred million dollars by doing this."

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