Written by Bryce Covert
Walgreen Co announced on Wednesday that it won’t go through with its acquisition of Switzerland-based Alliance Boots, a move called an “inversion” that would have shifted company headquarters overseas to avoid paying U.S. taxes.
While it will still go through with buying all of Alliance Boots’s shares, Walgreen will still be based in the Chicago area.
In a statement about the decision, the company said that it was “mindful of the ongoing public reaction to a potential inversion and Walgreens unique role as an iconic American consumer retail company with a major portion of its revenues derived from government-funded reimbursement programs.” CEO Greg Wasson also said that after an “extensive and rigorous analysis,” the company “could not arrive at a structure that provided the company and our board with the requisite level of confidence that a transaction of this significance would need to withstand extensive IRS review and scrutiny,” saying that “it was not in the best long-term interest of our shareholders.”
The company’s decision not to move its headquarters overseas via an acquisition is the third major potential deal to collapse in recent months.
Companies have come under increased scrutiny for this move, with Congressional hearings, statements from President Obama, and lawmakers urging action to stem the tide. Rep. Sander Levin (D-MI) introduced a bill to close a loophole that makes inversions legal. Sens. Dick Durbin (D-IL), Jack Reed (D-RI), and Elizabeth Warren (D-MA) sent a letter to President Obama on Tuesday urging him to take action on the issue. And on the same day, the Treasury Department announced that it was looking at “a broad range of authorities” for ways to limit companies’ ability to do inversion deals as well as ways to “meaningfully reduce the tax benefits” of such moves.
Yet plenty of deals look ready to move ahead, such as Pfizer’s takeover of AstraZeneca, which would save the company $1 billion in taxes each year with its headquarters abroad, and AbbVie, maker of Adderall and other drugs, acquiring Shire. The rate of inversion deals has accelerated recently, with more than half of the 76 companies that have done these deals in the last three decades completing them since the recession. About a dozen companies have made the move this year, and dozens could still come. These deals are costing the country between $30 billion and $90 billion a year in tax revenue.
While these companies aren’t supposed to get federal contracts, the ban is so easy to get around that more than a dozen of those who have moved their headquarters offshore get more than $1 billion a year in government work.
This post originally appeared on ThinkProgress.
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