Not everyone is sure that a Republican-backed cash flow tax proposal will put a stop to corporate inversions. Others said the system could drive mergers, but not necessarily inversions.
“Yes, the proposal will make it useful to develop IP in the U.S. and then sell it to a foreign related party,” said Peter Barnes, a former tax counsel for General Electric Co. and a professor at Duke University School of Law.
But he noted that it wouldn't matter whether the parent is based in the U.S. or abroad, for claiming the exemption for income from outbound transfers of intangibles.
Barnes, who is also of counsel with Caplin & Drysdale, Chartered, speculated that companies that rely on exports may seek mergers with importers or domestic producers to ensure that exemptions for exports are fully taken advantage of.
“To me, that is a more likely merger scenario than an inversion,” Barnes said.
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Excerpt taken from the article “Will Border-Adjusted Tax Halt Inversions? Some Are Skeptical” by Alex M. Parker for Bloomberg Law’s Daily Report for Executives.