By Peter Schroeder - 08/06/14 09:10 AM EDT
Walgreen Co. plans to fully acquire a British company in the coming months but will not relocate its headquarters abroad to avoid higher U.S. taxes, the company said Wednesday.
The drug store chain said a significant factor in its decision was the ongoing government scrutiny of corporate tax “inversions” in which companies change their headquarters to lower their tax bills.
Walgreen's, the largest pharmaceutical chain in the United States, said it will purchase the pharmacy chain Alliance Boots at the beginning of 2015. The combined company will continue to be based out of Chicago.
Greg Wasson, the company’s president and CEO, cited the “extensive IRS review and scrutiny” as a factor in the decision. Boots Alliance is based in Switzerland, which has a roughly 18 percent corporate tax rate, compared to the 35 percent tax rate in the United States.
“The company concluded it was not in the best long-term interest of our shareholders to attempt to re-domicile outside the U.S.,” said Wasson.
The Treasury Department and Congress are both looking into ways they can discourage the growing activity, and Walgreens said in a statement it was well aware of the ongoing controversy — and the blowback it might receive if it were to take such a step.
Senate Finance Committee Chairman Ron WydenRon WydenFeds list schools that sought exemption from discrimination statute IRS: Annual unpaid tax liability was 8B Overnight Cybersecurity: Fight over feds' hacking powers moves to Congress MORE (D-Ore.) hailed the company's decision to keep its base at home in the U.S., and urged other large companies to do the same.
"It’s great that Walgreens recognizes the long term strategic business value of staying an American company and I hope that others considering an inversion follow suit,” he said in a statement. “I’m working to build a bipartisan coalition to pursue immediate legislation to stop the inversion virus while working on a longer term path forward to fix the root problem — our broken tax code.”
About 47 U.S. companies have relocated their operations abroad to avoid U.S. taxes in the last decade, with more than 12 more similar deals in the works, according to congressional research.
This post updated at 1:47 pm.