By Kevin Drawbaugh
WASHINGTON, July 22 (Reuters) - Immediate government actionis needed to plug a loophole that allows U.S. corporations toavoid federal taxes by shifting their tax domiciles overseasthrough deals known as inversions, the head of the U.S. SenateFinance Committee said on 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 the trend. "Let'swork together to immediately cool down the inversion fever ...The inversion loophole needs to be plugged now," said DemocraticSenator Ron Wyden, finance committee chairman, at a hearing.
Several Democrats have offered bills to curb the inversiondeals, which can put foreign earnings out of the reach of theInternal Revenue Service and make other tax savings possible toboost a multinational company's bottom line. But no new law islikely as long as Republicans contend that inversion rules needto be part of a broader overhaul of the tax code, policyanalysts said.
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.
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 seldom mean a U.S. corporation physically leaveshome. Usually an inversion means that a company will open asmall office abroad, perhaps in England or Ireland, as a newaddress for tax purposes, leaving major operations intact.
President Barack Obama's 2015 budget proposed makinginversions harder to do by raising the foreign ownershiprequired. Congressional Democrats have made similar proposals. (Editing by Tom Brown)
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