Walgreens Remains US Based

I’ve caught a few headlines recently from Google Finance speculating whether Walgreens will keep the US as its tax domicile or go overseas where corporate tax is lower.

As a consequence of this, protesters have been outside Walgreens voicing their opinions. Even their stock price recently dropped since many investors assumed the tax inversion will happen.

However, as they come close to completing the acquisition of Alliance Boots, a European pharmacy retailer for $16 billion, Walgreen’s decision to not invert was announced.

According to Peter Frost, Tribune reporter:

“The new U.S.-based holding company will have four divisions: Walgreens, which will continue to be based in Deerfield; Boots, which will maintain its headquarters in Nottingham, U.K.; Pharmaceutical Wholesale and International Retail; and Global Brands.”

In addition:

“Walgreens Boots Alliance will have 11,000 retail stores in 10 countries, along with 370 distribution centers that serve 180,000 pharmacies, doctors, health centers and hospitals in 20 countries.”

To Invert or Not Invert?

Walgreens decision to stick to its roots as being US made and based is contradictive at times when many US companies are going overseas. With Congress not taking action quick enough to address the problem, what we are seeing is a spike in US corporations moving overseas.

According to John D. McKinnon, WSJ reporter:

“Overseas relocations by U.S. corporations appear to be accelerating in recent months, as evidenced by a wave of deals sweeping through the pharmaceutical industry. About 50 U.S. companies have reincorporated overseas during the last decade, as firms grow impatient with lack of change in the U.S. tax system and seek tax-friendlier environments.”

Tax Dodging Hurts the Residents

As an Illinois resident, what is shocking is how much the Governor has given to the company. Within the in-depth report by Americans For Tax Fairness it specified that:

“If Walgreens goes ahead with an inversion, it would be an afront to Illinois taxpayers. In 2012, the state awarded Walgreens a package valued at $46 million in tax credits over ten years in exchange for job creation. In awarding these credits, Illinois Governor Pat Quinn commended Walgreens’ “deep roots in Illinois.”

Also, it is estimated that a $4 billion tax dodge may have been tempting.

With Walgreens not going offshore, what came with it was a cost. However, looking at the company’s growth long-term, especially with the recent acquisition of Alliance Boots, the horizon seems nowhere but up.

What are your thoughts? Share them below!

-Thu

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