Taxes: Walgreen, America’s venerable drug-store chain, is thinking the unthinkable: relocating to Europe. Not because it sees growth and opportunity there, but because of onerous taxes here in the U.S. It’s an ominous trend.
The Financial Times of London calls it “one of the largest tax inversions ever.” That is, a company seeking to avoid punitive taxes in one market by moving to another.
No doubt the FT is right. And after its recent $16 billion takeover of Swiss-based Alliance Boots, it would be easy for Walgreen to remake itself as a Swiss company.
If it did, the Democratic Party’s liberals would no doubt call Walgreen unpatriotic for wanting to lessen its tax burden. In fact, they are responsible for an economic environment so hostile to capital and investment that companies now find it intolerable.
As we’ve noted, corporate tax rates in the U.S. are the highest among the developed nations. The average rate in America in 2013 was 39.13%; for all of the Organization for Economic Cooperation and Development nations, it stood at 28.2%.
In short, being headquartered here is a major competitive disadvantage for American firms.
According to an analysis by UBS, Walgreen’s U.S. tax rate is 37.5% — compared with Alliance Boots’ rate in Europe of about 20%. That’s a huge gap, worth billions of dollars a year.