A tax inversion is often described as a byproduct of a merger between two companies, but for the companies, it may be the primary motive for the merger. Tax inversion is both legal and advantageous, which is why it has become increasingly popular among companies. A number of corporations have already employed this method to save millions in taxes.
Tax inversions are becoming a growing trend because they allow companies to reduce their tax liability in the U.S. without having to engage in any illegal activity. There are other methods of legal tax evasion that companies adopt, but inversions tend to produce the most lucrative results.
The government fears that in a competitive market, tax inversions will become commonplace and the cost of doing business. This has led the Obama administration to explore options to prevent tax inversions. Proposed measures include changing the tax laws or imposing tax breaks restrictions on companies that are stacking their profits overseas.
Billions of revenue has led to increased discussion in how to limit tax inversions. Preventative steps are being considered in an evolving discussion among lawmakers. Ongoing efforts to stop tax inversions have brought many practicing companies under fire in recent weeks.