Medtronic would consider move back to US if tax laws changed - exec
23 FEB 2017
Medtronic (NYSE:MDT), the global medical products company that redomiciled to Ireland with the purchase of Covidien in 2014, would consider moving its corporate headquarters back to the US if the US tax rate is cut significantly, a senior Medtronic executive told this news service.
Mike Coyle, executive vice president of Medtronic's cardiac and vascular division, was speaking after he made a presentation at the RBC Capital Markets Healthcare Conference in New York on Thursday.
The current US corporate tax rate is currently at 35%, among the highest in the world. But elected officials including President Donald Trump and many members of Congress have advocated cutting the rate to the mid-teens level to spur economic growth and attract investment. Congress is expected to take up tax reform this year in what is expected to be a long and arduous effort.
Medtronic, long based in Minneapolis, completed the USD 49.9bn purchase of medical devices maker Covidien in 2015 in a cash-and-stock deal and moved its corporate headquarters to Ireland, where the lowest corporate tax rate is 12.5%, with the highest up to 25%.
Coyle said it remains unclear what US tax changes would be forthcoming under Trump and the GOP-controlled Congress. But a lower tax rate “could be” an incentive to move back to the US but he said “it would have to be a pretty important tax benefit” for the company to consider it. “We would never say never about anything.”
Coyle added that relocating Medtronic's corporate headquarters to the US would have benefits from an operational standpoint.
“Obviously we have a significant R&D presence in the US,” he said. A corporate move “would allow us to move some of our operations closer to our product development.”
Medtronic, which currently has an effective tax rate of 17%, was among the largest “inversions” of a US-based company in recent years, although the company argued at the time that the purchase was largely strategic in nature and not simply for tax savings.
However, the move, along with that of Pfizer’s (NYSE:PFE) attempt to buy Allergan (NYSE:AGN) in 2015 and Abbvie’s (NYSE:ABBV) attempt to buy the UK’s Shire (NASDAQ:SHPG) in 2014, prompted the US Treasury in 2016 to issue new rules thwarting inversions, which effectively ended the trend among large companies.
Trump, along with his now senior advisor Carl Icahn, campaigned in opposition to corporate inversions last year.