Walgreens Urged to Leave US to Gain Tax Benefit

A small group that owns shares of the largest pharmacy chain retailer in the United States wants Walgreens to relocate to Europe: “investors owning close to 5 per cent of Walgreens’ shares lobbied the company’s management to use its $16bn takeover of Swiss-based Alliance Boots to re-domicile its tax base,” reports Ed Hammond for the Financial Times. “The move, known as an inversion, would dramatically reduce Walgreens’ taxable income in the US.” US tax policies encourage such inversions: The US tax rate for Walgreens is 37.5 percent versus 20 percent for Boots; the firm could pay the lower rate if more than 20 percent of company shares were shifted to foreign owners. Corporate executives anticipate political risks, yet Hammond reports that such tax inversions have become popular in recent years, particularly in the pharmaceutical industry. Walgreens purchased about half of Boots and has an option to purchase the rest of the company. To add insult to injury, shareholders want Boots managers to have a bigger role in running the company. – YaleGlobal