Amid growing regulatory action to crack down on corporate tax inversions, a top U.S. senator is urging Hospira ($HSP) to keep its operations at home and abandon plans to move abroad for taxpaying purposes.
Sen. Dick Durbin (D-IL) issued a letter on Thursday to the Lake Forest, IL-based company, citing recent reports that Hospira intended to buy the medical-nutrition unit of French company Danone to avoid paying U.S. taxes. Durbin advised CEO F. Michael Ball to keep the company’s domestic headquarters, saying a significant part of Hospira’s revenue stems from U.S. taxpayers and benefits, Reutersreports.
“Hospira’s success, including second-quarter profits that more than doubled, depends on the educated workforce, transportation infrastructure, and tax benefits here in the United States,” Durbin said in the letter. “Your company’s injectable drugs and infusion technologies are purchased through taxpayer-supported program, such as the Veterans Health Administration and Medicare, which have contributed to Hospira’s corporate success.”
The letter follows on the heels of mounting government criticism, as U.S. lawmakers outline measures to rein in companies that are moving abroad to lower their tax rate. Earlier this week, Senate Democrats laid out a plan to restrict earnings stripping to make corporate tax inversions less appealing, The Wall Street Journal reports. Led by Sen. Chuck Schumer (D-NY), the proposal could become part of a larger, bipartisan effort to curb tax inversions.
“If we don’t pass this provision, it won’t be just a certain type of company that asks for inversions, but every American company would because the deduction is available to all of them,” Schumer told the WSJ.
However, companies with pending tax inversion deals like med tech giant Medtronic ($MDT) aren’t going down without a fight. The Minnesota-based company hired former senators as lobbyists to challenge anti-inversion legislation as the battle over corporate tax inversions reaches a boiling point. Medtronic announced in June that it would acquire Irish device outfit Covidien ($COV) for $43 million, saving $3.5 billion to $4.2 billion by moving its domicile overseas. But CEO Omar Ishrak continues to defend the pending deal as not purely motivated by tax-inversion purposes, emphasizing a $10 billion U.S. technology investment over the next 10 years that will channel funds into R&D, acquisitions and early stage venture capital.