National Post (National Edition)
Abbvie sets tax-inversion record with Shire deal
ber of Canadian automotive jobs in 2012 was 33% below its 2000 peak.
And Canada has fallen to 16th place in the world for car production, down from eighth in 1999, according to the International Organization of Motor Vehicle Manufacturers.
The Canadian industry’s future is by no means assured. As part of the bailout package, GM promised to keep 16% of its North American production in Canada until the end of 2016 — but after that, it is free to rearrange its operations however it likes.
“We should all be worried,” said Mr. Duncan. “We are very competitive on a number of fronts, but there is no doubt it’s a global industry and production will move to where overall costs are the lowest.”
Canada faces a number of challenges when it comes to attracting manufacturing investment. The strong Canadian dollar, relatively high labour costs and weak productivity growth have combined to make Canada unattractive compared to Mexico or the southern U.S., where costs tend to be much lower.
How to offset that challenge has been the subject of debate among policymakers for years. For now, the government tends to employ an ad-hoc strategy of subsidies and loans, but that’s not the most sustainable model, especially in a subsidy race with larger, wealthier rivals like the U.S., Japan and South Korea.
The autoworkers of Unifor have called for a national auto policy, manufacturing commitments from the major automakers and consistent government investment, among other things.
“Other countries are soliciting automotive investment and they’re going after our jobs in a strategic and direct way,” said Mr. Lewenza.
“Without a combined strategy between provincial and federal governments, I think we are vulnerable, no question.” AbbVie Inc. and Shire PLC’s US$54.8-billion deal will make AbbVie the largest U.S. company to move its legal address abroad to lower its taxes as U.S. lawmakers seek ways to curb the transactions.
Shire holders will get cash and stock valued at £52.48 (US$89.68) a share, the companies said Friday in a statement. The price is 53% above Shire’s closing level on May 2, before AbbVie made its first takeover proposal.
The acquisition comes in a record period of pharmaceutical deals. It will allow Chicago-based AbbVie to move its legal residence, though not its operations, to the U.K., lowering it’s tax rate in 2016 to 13% from 22%. Shire’s drugs for attention deficit hyperactivity disorder and rare diseases will diversify AbbVie’s portfolio, dominated by the rheumatoid arthritis medicine Humira.
Analysts asked if the deal was done primarily for tax reasons. “This is a transaction that we believe has excellent strategic fit, well beyond the tax impact,” AbbVie chief executive Richard Gonzalez said on a conference call. “We wouldn’t be doing it if it was just for the tax impact.”
At the same time, Mr. Gonzalez said the higher corporate tax rate in the U.S. is pushing
We wouldn’t be doing it if it was just for the tax impact
companies abroad. “Companies like ours need access to our global cash flows,” he said. “Today we’re at a disadvantage compared to our foreign competitors, and that’s the debate we should be having around inversions and our tax code.”
The U.S. government has been scrutinizing so-called tax inversions, and Senator Ron Wyden, a Democrat from Oregon, is proposing a bill that would make them more difficult to do. A congressional panel estimated this year that preventing future inversions would preserve US$19.5-billion in otherwise forgone tax revenue over the next 10 years.
Mr. Gonzalez, during his call, said government action to stop tax inversions probably won’t halt the Shire deal.
“We’ve looked carefully at that aspect and we believe its executable,” he said.
Every deal that gets done, though, puts pressure on the U.S. government to act, said Brian Corvino, an analyst with Decision Resources Group.