Business study: Tax system spurs foreign takeovers

The American tax code has spurred a rash of foreign takeovers of U.S. companies, according to a new study released by a prominent business lobby.

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The study released by the Business Roundtable asserted that the U.S. has lost $179 billion in assets over the last decade on mergers and acquisitions, at least in part because of its comparatively high corporate tax rate of 35 percent.

But if Washington slashed that corporate rate to 25 percent, the U.S. would have actually gained $590 billion in assets, according to the study conducted by Ernst and Young – a net shift of some $769 billion. In all, some 1,300 companies would have kept stayed in the U.S. with the lower rate, the study added.

“American business investment and job creation are hamstrung by policymakers’ failure to fix our broken tax code,” said John Engler, the president of the Business Roundtable, which represents top corporate chief executives.

“Our failed policies have turned the United States into a net exporter of headquarters, valuable assets and startup technologies. We’ve got to reverse this trend.”

The group’s study looked at roughly 25,000 cross-border mergers between 2004 and 2013, and also blamed the U.S. policy of taxing businesses on income they make anywhere in the world. Companies can defer paying those taxes until they bring the profits back to the U.S., which has led to corporations stashing roughly $2 trillion offshore.

The study also makes the case that, while big-name mergers might grab the headlines, it’s the smaller mergers that could be more damaging. Half of cross-border mergers, the study said, were valued at no more than $29 million.

Along with other business groups, the Roundtable has been pushing for tax reform for years, saying that a 25 percent corporate rate would at least get the U.S. closer to some of its foreign competitors. The business community is also seeking to shift to a system that would shield foreign business income from U.S. taxation.

Republicans and business groups have also said that Democrats’ attempts to crack down on corporate inversions could also incentivize more foreign takeovers of U.S. companies. But Democrats have called those concerns overblown.