Walgreen considering move to Europe for leaner taxes?

[dmcowen674]

Walgreen considering move to Europe for leaner taxes?

Perhaps this is the beginning of the exodus. Some people have been actively calling for "the rich" to leave the U.S. because they aren't paying what they consider a "fair share." Perhaps soon they'll get their wish. At the very least it's a breach of fiduciary duty for the company to remain headquartered in suburban Chicago and subject to the whims of city and state laws and taxes.

http://www.businessweek.com/articles/2014-04-14/should-walgreen-move-to-europe-for-leaner-taxes

In the American pantheon, there’s baseball, apple pie, and a Walgreens (WAG) drugstore on nearly every other corner. Yet an investor group wants to persuade the Midwestern stalwart to relocate to Europe as a way to reduce its corporate tax burden.

Three hedge funds and a Goldman Sachs (GS) investment fund want the 113-year-old pharmacy chain, based in suburban Chicago, to consider a tax “inversion” and move to Europe, as the Financial Times reported today, citing unnamed sources. Walgreen Chief Executive Greg Wasson and the company’s chief financial officer met in Paris last week with a hedge fund group that wants the company to leave Illinois for what would most likely be Switzerland, which has lower tax rates. <snip>

Yes, please start the exodus.

I hope they move to Europe and we close down every store in the U.S.

 

[Hayabusa Rider]

Yes, please start the exodus.

I hope they move to Europe and we close down every store in the U.S.

Because if it hurts one person who is well off destroying a thousand who aren't is a worthy sacrifice, eh?

 

[Broheim]

yeah, they're worried about business taxes here, and the thought of moving to Europe?

lol sure.

average EU corporate tax rate is in the low 20's.

 

[BoomerD]

Let them go...take their cut-rate stores with them. (only the cheap goods are "cut-rate" their prescription prices, especially for those without insurance, aren't all that cheap.)

Some other company/corporation will take their place.

 

[WelshBloke]

Some other company/corporation will take their place.

That.

Plus good luck competing in the crowded European market that's already full of recognised (to the target market) names.

 

[AViking]

Did you guys even read the article?

They're not moving. They're just considering using a tax haven. They already own tons of drug stores in Europe.

 

[Hayabusa Rider]

That.

Plus good luck competing in the crowded European market that's already full of recognised (to the target market) names.

The latter is certainly a problem and most likely what would keep them out of the market.

Question.

If you have a large sum of money to invest in a business, would you pick one which has no return?

 

[Skyclad1uhm1]

As a lot of people don't seem to understand the construct:

A company pays taxes in the country it's head office is located in.

Imagine company X having to pay 35% taxes in the US.

Ireland/The Netherlands/any other non-US country currently receives from that company: nothing in tax. And no economy boost from its employees as those are in the US.

Now offer to house them at a tax rate of 12.5%. That's 22.5% less than they have to pay in the US. They bring their own employees, only need a small office, and can always hire a few locals if they need more. The rest of the company stays put, but they suddenly pay a lot less in taxes. The country they moved to gains from it, and the company gains from it. The only one losing from it is the US government and with that the US population (as they'll have to fill in for lost taxes).

Local companies often pay a higher tax percentage than foreign ones, as foreign ones wouldn't be there without the low taxrate and for local companies it is not always an option to move abroad.

 

[boomerang]

If we truly have/are moving to a global economy, it would probably be in the best interests of the country for our leaders to get on board. Maybe in the next regime change because our current one doesn't have the smarts to comprehend what's going on in the world around them.

 

[Exterous]

Still, when it comes to the cost of doing business anywhere in Europe--think infrastructure, resources, labor costs (holy shit, let's think about cost of labor in Europe ), local culture (most places will be closing at 5pm sharp in the majority of that part of the world), I guarandamn-tee this isn't the type of move that will lead to better profits.

as such, this is all FUD

How much infrastructure resources and long term labor costs do you really need to move your headquarters? They aren't talking about moving all their stores or being exclusively a European country - just their headquarters. The claim is that the 35% tax rate will drop to 20% which is HUGE for a company the size of Walgreens (2013 gross profit: $21billion) and will pay for a small (or even large) European HQ many times over. Heck they attribute the 4% drop in taxes over the last couple of years to their increased overseas presence (CVS pays 39%)

Plus good luck competing in the crowded European market that's already full of recognised (to the target market) names.

Like Alliance Boots? (Largest pharmacy in UK for those not familiar) Walgreens currently owns ~50% of them will finish the acquisition of them next year

Besides this is more about moving the headquarters than closing down in the US and expanding in Europe

 

[sportage]

CVS has been giving Walgreens a run for their money.
CVS has been expanding like crazy, usually within a block of another Walgreens store.
Plus, CVS stopped selling cigs in the health interest of the public, where as Walgreens continues to sell an item that kills people in mass all the while telling you to BE WELL as you leave their store.

On the other hand, if Walgreens were moving their HQ to Canada, would that seem as upsetting to people?
Canada wants to build a pipe line across our nation.
Canada owns a large number of convenience stores under various names, across America.
Many people here want the Canadian pipeline built despite the probable negative consequences.
Politicians are actually running for various office and basing their support of the foreign owned pipeline.
I think it doesn't matter what Walgreens does.
We're far beyond waving any banner supporting our nations best interest.
Just ask any US politician with an "R" after their name.

 

[Londo_Jowo]

^ As for the android that has blown out it's brains, you may want to follow the money as Walgreens has donated large sums to both political parties.

http://www.followthemoney.org/database/topcontributor.phtml?u=2774&y=0

Like Alliance Boots? (Largest pharmacy in UK for those not familiar) Walgreens currently owns ~50% of them will finish the acquisition of them next year

Alliance Boots (Boots) can be found in Southeast Asia as well. There's a Boots stores in the airports in Singapore and Kuala Lumpur.

Besides this is more about moving the headquarters than closing down in the US and expanding in Europe

That's the way I interpreted the article as well.

 

[werepossum]

^ As for the android that has blown out it's brains, you may want to follow the money as Walgreens has donated large sums to both political parties.

http://www.followthemoney.org/database/topcontributor.phtml?u=2774&y=0

Alliance Boots (Boots) can be found in Southeast Asia as well. There's a Boots stores in the airports in Singapore and Kuala Lumpur.

That's the way I interpreted the article as well.

The same way that everyone with a spare brain cell interpreted it.

Walgreens also dropped their health insurance to avoid the added costs of Obamacare, so they are being pretty aggressive about containing costs and may well move. Probably a good stock to own, but not a company with which I care to do business. Full disclosure, my nephew is an assistant manager and likes the company.

They would probably have to step up their protection money political donations to protect themselves if they do move though.

 

[alzan]

As a lot of people don't seem to understand the construct:

A company pays taxes in the country it's head office is located in.

Imagine company X having to pay 35% taxes in the US.

Ireland/The Netherlands/any other non-US country currently receives from that company: nothing in tax. And no economy boost from its employees as those are in the US.

Now offer to house them at a tax rate of 12.5%. That's 22.5% less than they have to pay in the US. They bring their own employees, only need a small office, and can always hire a few locals if they need more. The rest of the company stays put, but they suddenly pay a lot less in taxes. The country they moved to gains from it, and the company gains from it. The only one losing from it is the US government and with that the US population (as they'll have to fill in for lost taxes).

Local companies often pay a higher tax percentage than foreign ones, as foreign ones wouldn't be there without the low taxrate and for local companies it is not always an option to move abroad.

35% is the statutory rate; a better comparison to European corporate tax rates would be Walgreens' effective tax rate in the US.

 

[Skyclad1uhm1]

35% is the statutory rate; a better comparison to European corporate tax rates would be Walgreens' effective tax rate in the US.

Didn't look up the numbers, just used the ones mentioned by others.
US corporate tax rate can be even higher:
http://www.kpmg.com/global/en/servi...esources/pages/corporate-tax-rates-table.aspx

Note this for US companies in the Netherlands btw:

http://www.expatax.nl/corporationtax.php

Since February 2006 there is a new tax treaty with the US indicating that profit sent from and to the USA by mother- and daughter companies can be done tax free.

 

[K1052]

Apparently the hedge guys also told Walgreens management that they want the Alliance Boot guys to eventually run the combined company. I can imagine the chilly reception their ideas have enjoyed inside Walgreens.

Letting fund managers dictate the course of your business is generally not a good idea.

 

[TurtleCrusher]

Good luck. Taxes aren't actually that much better there.

 

[DCal430]

Labor cost are NOT higher in Europe. While Europe has a higher minimum wage, the median wage paid in the U.S is higher than in Europe. So overall labour cost are in fact lower.

 

[HomerJS]

Don't blame them because corporations have done so poorly since 2008...

http://thinkprogress.org/economy/2014/03/27/3420092/corporate-profits-record-2013/

 

[Mani]

Love the conservative mythology that lower corporate tax rates lead to a stronger economy. By that logic, Bermuda, Taiwan, and Malaysia must be economic powerhouses by now.

 

[Mark R]

Companies should pay taxes where they make their money.
They shouldn't be allowed to pull off this bullshit where they shuffle all their cash to some country with a favourable tax rate where they don't really do any business.

The issue is what you define as "making money".

See Starbucks' scheme, for example. The stores buy beans which have been prepared to a secret recipe.

Beans processor subsidiaries process the beans under license from a dutch company that holds the recipe.

The scheme is structured so that the license fees for the processing recipe amount for something like $1 per coffee.

The store that sells the coffee is a separate company (either franchise or subsidiary) to the processor (a subsidary) and to the IP comapny.

When starbucks sells a cup of coffee, where is the money made? And how much is made in that country, in the country where teh beans are processed and the country where the IP is licensed?

It is this exact point that the starbucks CEO made to Margaret Hodge and the Public Accounts Committee when he was summoned to explain why his company had not made any taxable UK profits, despite the annual report stating that the UK business had been "highly profitable".

The fundamental problem is that when comapnies get to this size, they can afford the best accountants and lawyers who will find any loophole, and have sufficient power to negotiate tax rates with governments. For example, the Netherlands have a relatively low tax-rate for IP, but starbucks negotiated a much better deal because they were channelling so much money into the country. Rumour is that they negotiated a tax rate of 1.9% with the Dutch government.