Boston, MA 06/17/2014 (wallstreetpr) – The largest retail drug store in the U.S, Walgreen Company (NYSE:WAG), is thought to be in an advanced stage on the possibility of decamping its operation in Switzerland in quest for large tax breaks; this is just two months after the company gained hefty package of tax credits in Illinois, in exchange of keeping corporate jobs. Walgreen plans to carry out its operations in Switzerland through what is normally called in the industry as an Inversion.
Inversion to Cost U.S Treasury $4 Billion
The move is expected to cost the U.S treasury about $4 billion in tax revenue over the next five years. The move could also be detrimental to the U.S economy as other large retailers may seek foreign acquisitions as a way of avoiding large billings. If Walgreen completes its move into Switzerland, it is expected to lower its rate to about 20% from the current high of 35%.
The company’s pending buyout of Switzerland based Alliance Boots Chain is expected to kick start the inversion operations expected to make the giant retail drug store bigger and more international. Some people are of the opinion that Walgreen Company (NYSE:WAG)’s earnings per share could improve by as much as 75%, as a result of favorable tax laws in Switzerland compared to the U.S.
Walgreen receives Support for the Inversion Plan
Walgreens bottom line is highly bolstered’ by taxpayer funded Medicare and Medicaid that accounts for a third of all pharmacy sales. Relocating abroad is thus expected to represent a massive exploitation for the U.S tax code. The inversion could take place somewhere next year should shareholders approve the acquisition of Alliance Boots.
Walgreen bought 45% in Boots in 2012, but its executives downplayed the opportunity of engaging in an inversion at that time. Massive push from large shareholders looks to have gained momentum making the company think of the idea as it is expected to result in massive gains. If Walgreen Company (NYSE:WAG) does relocate abroad, it will join plenty of pharmaceuticals and technology companies that have formed subsidiaries overseas to avoid high U.S Corporate tax laws.
