New Report Analyzes Walgreens’ Possible Move of its Corporate Address Offshore to Avoid Paying $4 Billion in U.S. Taxes over Five-Year Period
Wednesday, June 11, 2014
WASHINGTON – A new report released today by Americans for Tax Fairness (ATF) and Change to Win Retail Initiatives estimates that Walgreens could cost taxpayers $4 billion in lost revenue over five years should the company decide to renounce its American corporate legal status and move its official address to Switzerland, a tax haven. The company is widely reported to be considering this move and says it will announce its intentions as soon as this summer. Walgreens is the nation’s largest pharmacy retailer with 8,200 stores and locations in all 50 states.
The report, Offshoring America’s Drugstore: Walgreens May Move its Corporate Address to a Tax Haven to Avoid Paying Billions in U.S. Taxes, bases its analysis on estimates provided by three major equity research firms, which have said that the company’s income tax rate could be cut to 20%; Walgreens currently pays about a 31% tax rate.
The report finds that Walgreens benefits substantially from U.S. taxpayer dollars:
- Walgreens receives nearly a quarter of its income from taxpayers through government programs. Of its $72 billion in 2013 sales, an estimated $16.7 billion, or 23%, came from Medicare and Medicaid.
- It received $46 million in tax breaks over 10 years from the state of Illinois, the current legal location of the Walgreens corporation.
- U.S. taxpayers have spent $11 million subsidizing executive bonuses at Walgreens over the last five years. A table showing the Walgreens executives getting subsidies is available here.
“Walgreens may decide to no longer be an American company simply so it can dodge paying its fair share of taxes,” said Frank Clemente, executive director of Americans for Tax Fairness. “Many Americans will find it unfair and deeply unpatriotic if the company moves offshore, while continuing to make its money here, leaving the rest of us to pick up the tab for its tax avoidance.”
“It is unconscionable that Walgreens is considering this tax dodge—especially in light of the billions of dollars it receives from U.S. taxpayers every year,” said Nell Geiser, Associate Director of Change to Win Retail Initiatives. “Walgreens should show its commitment to our communities and our country by staying an American company.”
Walgreens is reportedly considering a so-called “corporate tax inversion,” which is made possible by a loophole in the tax code that allows American companies re-incorporate in a foreign country when just 20% of its stock is owned outside of the United States. Walgreens might meet that criterion by completing its purchase of Europe’s largest pharmaceutical retailer and wholesaler Alliance Boots, which is expected to happen in early 2015. Alliance Boots has itself come under criticism for tax avoidance, particularly when it moved from the United Kingdom to the tax haven of Switzerland in 2008.
Walgreens is reportedly under pressure from several large hedge funds and Alliance Boots Executive Chairman Stephano Pessina—who is Walgreens’ largest shareholder—to make the move to Switzerland.
“Because Walgreens is present in thousands of American communities, its potential plan to change its address to Switzerland to avoid paying U.S. taxes may raise the ire of the American public,” said Clemente.
Walgreens may find itself at the center of a public relations firestorm, as it struggles to explain to American consumers why it should continue to enjoy the substantial benefits of operating in the United States while it reincorporates in Switzerland.
Americans for Tax Fairness is a diverse coalition of 400 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.
Change to Win Retail Initiatives is a project of the Change to Win labor federation. Since 2005, it has been an active stakeholder in the pharmacy industry, advocating on behalf of workers and the general public for consumer protections, health care access, tax fairness and other safeguards to rebuild the middle class.