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    IRS chief says US powerless to stop firms’ offshore deals

    IRS Commissioner John Koskinen sees a need to revise the US tax code.
    J. Scott Applewhite/Associated Press
    IRS Commissioner John Koskinen sees a need to revise the US tax code.

    WASHINGTON — The US government probably can’t take regulatory action to stop companies from lowering tax bills through deals that put their legal addresses outside the country, IRS Commissioner John Koskinen said Wednesday.

    Pfizer this week proposed the biggest such deal yet, a $98.7 billion takeover of AstraZeneca that would move the largest US drugmaker to Britain for tax purposes and lower its tax rate.

    ‘‘We’ve done, I think, probably all we can within the statute,’’ Koskinen, 74, told reporters in Washington, saying the trend of corporate moves point up the need to revise the US tax code. ‘‘We try to make sure people are within the bounds, but if they’re within the bounds, if they play according to the rules, then they have a right to do that.’’


    Koskinen’s remarks show the limits of the government’s ability to respond without Congress and suggest that the Obama administration won’t make a regulatory move to stop or limit so- called corporate inversions.

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    Pfizer would join at least 19 other companies making or contemplating similar transactions, including Chiquita Brands International Inc. and Omnicom Group, the largest US advertising firm.

    Cracking down on deals in which US companies move their legal address outside the country to pay lower taxes is a priority for the Obama administration, a Treasury Department official said earlier Wednesday. The official, who sought anonymity to discuss the administration’s plans, said the transactions emphasize the need for a revision of the US tax code to reduce rates.

    The broader tax plan and the narrower limits on inversion deals haven’t advanced in Congress. The Treasury Department hasn’t said whether it would curtail the deals with new regulations that it could advance without Congress.

    US lawmakers have responded to the string of deals by talking about the importance of broader changes to the US tax code, which are months if not years away.


    The prospect of Treasury regulations or legislation could encourage companies to accelerate deals.

    These deals have become attractive in part because of the increasing disparity in countries’ marginal corporate income tax rates, which are typically higher than what companies actually pay. Ireland, which will be the new home address for Charlotte, N.C.-based Chiquita, the banana distributor, has a 12.5 percent rate. Britain’s rate is 21 percent and will decline to 20 percent next year, with no tax on active businesses outside the country. In contrast, the top US corporate rate is 35 percent. Companies also must pay US taxes when they repatriate foreign profits, after receiving credits for foreign taxes.

    The spate of inversion deals mirrors what happened in 2001 and 2002, when companies including Ingersoll-Rand PLC and Cooper Industries PLC moved abroad.