Walgreens Shareholders Propose Ultimate Tax Dodge

4/14/14 2:52PM EST

Walgreens Shareholders Propose Ultimate Tax Dodge Walgreens Shareholders Propose Ultimate Tax Dodge

Image via Flickr/ Phillip Pessar

Tired of paying taxes on U.S. income? Hedge fund managers and Goldman Sachs bankers have an age-old answer: Go East. A powerful group of Walgreens shareholders is pushing the company to relocate from Illinois to Europe in order to access more favorable tax codes, Financial Times reports, in a move that would increase earnings for investors on a dramatic scale.

Visions of lighter taxes popped into the shareholders’ heads after Walgreens acquired 45 percent of European-based Alliance Boots for $6.5 billion. Walgreens has an option to acquire the remainder for $9.5 billion. The group of shareholders pressuring Walgreens to consider the move is headed by Goldman Sachs Investment Partners along with hedge funds Jana Partners and Och-Ziff, Financial Times reports.With control of over 5 percent of Walgreens, the group would benefit immensely from a lighter annual tax burden.

In order to enjoy the splendors of the European tax code, Walgreens would have to restructure its business by transferring over 20 percent of holdings to foreign-controlled companies and individuals, which would allow it to dodge the 37.5 percent tax bill U.S. corporations either pay or find a way to avoid.

Walgreens is apparently taking the suggestion seriously. Financial Times reports CEO Greg Wasson joined CFO Wade Miquelon and the chairman of Alliance Boots in entertaining the powerful shareholder group at a swanky hotel in Paris on April 11.

How could Walgreens management say no to slashing its tax burden down to as low as 20 percent (what Alliance Boots pays)? There would certainly be a strong reaction in the media, especially when members of U.S. Congress pushing for tax fairness get a hold of the story. U.S. tech companies have been pounded with negative press for failing to pay reasonable taxes on their earnings in the U.S. and Europe, which was achieved through corporate structuring that created headquarters based in Europe.


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