Lew promises "targeted guidance" on how to reduce the tax benefits of relocating companies abroad.
The U.S. Treasury department is set to unveil its latest plans to crack down on corporations who cut their tax bills by moving their domicile abroad.
According to The Wall Street Journal, Treasury will publish “targeted guidance” later this week on how to limit the tax benefits of such moves. It cited a letter to lawmakers by Treasury Secretary Jack Lew.
The Obama administration has been gunning for so called ‘inversions’, in which a U.S. company buys a smaller foreign company and then locates the merged company outside the U.S. for tax purposes, for over a year, but that hasn’t stopped the flow of deals. It still hasn’t issued the formal regulations it promised last year.
“Treasury cannot stop inversions without new statutory authority,” Lew wrote. “Unless and until Congress acts, creative accountants and lawyers will continue to find new ways for companies to move their tax residences overseas and avoid paying taxes here at home.”
The trend to inversions has been particularly strong in the pharmaceuticals sector, where many essentially U.S.-based or -focused companies have shifted their tax domicile to countries such as Ireland or the Netherlands, which have particularly generous corporate tax regimes, especially as regards monetizing patent-protected intellectual property. Last month, it emerged that Pfizer Inc. PFE had approached Ireland-domiciled Allergan Plc AGN over just such a deal.
“By relocating their tax residences overseas, inverted companies erode the U.S. income tax base and place a greater financial burden on other businesses and American families,” Lew wrote.
Treasury has warned that any new regulations could be retroactive to September 2014. That means that they could affect companies such as medical goods maker Medtronic Plc MDT , which inverted after buying rival Covidian last year, and pharma company Mylan NV, MYL which did the same after buying Abbott Laboratories.
For more on how the corporate sector views inversions, watch Mylan CEO Heather Bresch defend the practise last month at Fortune’s Most Powerful Women summit last month (and read more here).