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(Adds Hatch comments, paragraphs 4-9)
By Kevin Drawbaugh
WASHINGTON, July 22 (Reuters) - Immediate government actionis needed to stop U.S. corporations from avoiding federal taxesby shifting their tax domiciles overseas through deals known asinversions, the head of the U.S. Senate Finance Committee saidon Tuesday.
Nine inversion deals have been agreed to this year bycompanies ranging from banana distributor Chiquita BrandsInternational Inc to drugmaker AbbVie Inc andmore are being considered. The transactions are setting a recordpace since the first inversion was done 32 years ago.
Washington is increasingly concerned about this. "Let's worktogether to immediately cool down the inversion fever ... Theinversion loophole needs to be plugged now," said DemocraticSenator Ron Wyden, finance committee chairman, at a hearing.
Several Democrats have offered bills to curb inversions,which let companies cut their taxes primarily by putting foreignearnings out of the reach of the Internal Revenue Service.
Wyden said his panel asked the chief executives of severalinverted companies to testify at the hearing on internationaltax law problems. "None accepted our invitations," he said.
No new anti-inversion law is likely to be approved as longas Republicans insist that such a step be accompanied by anoverhaul of the tax code, policy analysts said.
Utah Senator Orrin Hatch, the finance committee's topRepublican, said, "The ultimate answer to this problem - and theonly way to completely address the issue of inversions - is toreform our tax code.
"However, as I've also said publicly, there may be stepsthat Congress can take to at least partially address this issuein the interim ... Whatever approach we take, it should not beretroactive or punitive. And it should be revenue neutral."
Hatch said he does not support recent bills introduced byDemocrats.
A senior official from the U.S. Treasury Department,speaking to the committee, reiterated the Obama administration'scall for urgent action by Congress to implement a White Houseproposal to make inversions more difficult to do.
"Congress should pass legislation immediately with aneffective date of May 2014 to prevent companies from effectivelyrenouncing their citizenship to get out of paying taxes," saidRobert Stack, deputy assistant secretary at the Treasury.
"We are aware of many more inversions in the works rightnow," he added.
But the Republican-controlled U.S. House of Representativeswill not act on inversions "unless there's comprehensive taxreform, and that's dead for this year," said Greg Valliere,chief political strategist at Potomac Research Group.
Inversions are still rare, but they are becoming morecommon. Of the roughly 60 deals done since 1982, more than halfhave come in just the last six years, a Reuters review showed.
An inversion involves a U.S. corporation buying or settingup a smaller company abroad, then shifting its tax home base tothat company's country, which typically has lower tax rates thanin the United States. Such deals usually mean opening a smalloffice abroad for tax purposes, leaving major operations intact. (Editing by Tom Brown and David Gregorio)
