Calif. firm’s merger deal about to test Obama administration’s anti-inversion rules

Calif. firm’s merger deal about to test Obama administration’s anti-inversion rules

San Jose, Calif.-based Polycom announced on Friday that it was being acquired by its Canadian competitor Mitel Networks in a $2 billion deal; but many experts see the deal as an attempt by the company to move overseas to lower its tax bill.

The proposed merger deal has a number of classic signs of an “inversion” in which many American companies have previously attempted to lower their tax bills by moving their headquarters out of the nation.

Robert Willens, an independent tax attorney, said, “I understand why they wouldn’t want to call it that, but this meets the technical requirements of an inversion. It is kind of silly that they’re saying it’s not.”

Polycom announced its controversial merger deal less than a week after President Barack Obama’s administration introduced new rules to discourage U.S. companies from moving headquarters to other nations to lower their tax bill.

The California-based telecommunications firm’s proposed merger deal is being watched closely by politicians as well as businesses as it about to test the Obama administration’s new anti-inversion rules.

Last week, the anti-inversion rules forced pharmaceuticals giant Pfizer Inc. to shelve its $160 billion merger with Dublin-based Allergan. But experts warned that inversions would likely continue until the government lowers the nation’s 35 per cent corporate tax rate, which is among the highest in the entire world.

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