United States drugstore retail chain Walgreens has decided against transferring its tax domicile overseas. This has dashed Swiss hopes that Walgreens’ acquisition of Alliance Boots would pave the way for a move to Bern.
In a detailed release outlining its decision to buy the remaining 55% stake in Swiss-based health and beauty retailer Alliance Boots, Walgreens said the new combined holding company would be headquartered in the Chicago area.
A spokeswoman for Alliance Boots told swissinfo.ch nothing would change for Bern, although the Swiss holding company would technically cease to exist.
“It doesn’t mean the people will move. They are expected to stay where they are, carrying out the same functions, along with the synergy joint venture Walgreens-Boots Alliance Development,” she said.
The Alliance Boots headquarters has been located in Bern since 2008.
Niklaus Bernhard of Bern’s department of economic affairs said he was glad Alliance Boots would maintain its presence in the city and looked forward to continued good cooperation with the company.
Walgreens acknowledged that its management and board of directors had thoroughly evaluated the possibility of combining Walgreens and Alliance Boots under a foreign parent company in an “inversion” transaction.
As part of this process, the company was “mindful of the ongoing public reaction to a potential inversion and Walgreens' unique role as an iconic American consumer retail company with a major portion of its revenues derived from government-funded reimbursement programs”, concluding that it was not in the best interests of the company to attempt to re-domicile outside the US.
The inversion tactic has become increasingly popular with US companies seeking tax relief, sparking a backlash in Washington and among the public. Walgreens was rumoured to be one of around 25 firms sizing up a move to Europe to escape higher US taxes.
The head of the US Senate finance committee, Ron Wyden, said that up to 25 inversion deals might be brokered by US firms in the near future unless politicians changed the law to prevent companies from opting out of US taxes.
“The inversion virus now seems to be multiplying every few days,” Wyden said at a hearing last month. “The underlying sickness continues to gnaw away at the American economy with increasing intensity.”
Most of the cases being reported in the media involve firms moving to Ireland and Britain. But Switzerland has also cropped up in such discussions, just as it did during last year’s global debate about firms such as Amazon and Starbucks shifting profits around the world to reduce their tax bills.
According to Philippe Monnier of the Greater Geneva Bern area, the economic development agency representing western Switzerland, it would not be possible to estimate the potential loss to Bern’s tax coffers from Walgreens’ no-show.
“How much profit can be transferred to Switzerland for tax purposes depends on how much core activity is transferred here. The tax rates also vary depending on the activities carried out in Switzerland,” he told swissinfo.ch.
Although there has been a decline in the number of US companies establishing regional headquarters or other operations to Switzerland, 2014 is a record year so far for new companies attracted from all over the world by the Greater Geneva Bern area.
“In the past the trend was US-centric, but now we have many companies from the BRIC countries [Brazil, Russia, India and China] and other less-known countries,” Monnier said.