In 2012, American drug store giant Walgreens spent $6.7 billion to acquire a 45 percent share of the European drug store chain, Alliance Boots. Now the move may be coming back to haunt them, as billionaire Stefano Pessina, who owns eight percent of Walgreens thanks to the prior deal, is pushing for the company to relocate to Switzerland in order to save on corporate taxes.
There were reports last spring that Walgreens CEO Greg Wasson is not a fan of the move. But following an April meeting in Paris between Walgreens executives and outside investors, the official tone of the company began to change. On April 14, Walgreens issued a statement that read, in part:
Our focus is always on analyzing and doing what is in the best long-term interest of our company and its shareholders. When we have something more definitive to announce about our future structure and strategies, we will do so.
ChicagoBusiness.com reports that the investors requested the meeting due to Wasson’s refusal to entertain the idea of relocating the company’s headquarters to Switzerland. It is widely believed that Wasson is losing control of Walgreens to Pessina. Next year, Walgreens will complete the purchase of the remainder of Alliance Boots, which will double Pessina’s holdings in the company. Pessina already controls more Walgreens stock than does Wasson.
Walgreens move will result in huge tax savings.
Currently, Walgreens pays over 30 percent of its revenue in American taxes. Analysts observe that by trading in an American corporate address for a Swiss one, the company’s total tax bill will drop to as low as 17 percent. Keep in mind that, even after the merger of Walgreens and Boots is completed, the bulk of Walgreens’ business will remain in the United States. But, thanks to the company setting up its headquarters in Switzerland, its taxes will go into the coffers of the Swiss government. This means that the company will become something of a freeloader, taking advantage of American infrastructure without contributing the money that helps create and maintain that infrastructure.
Other companies have moved to Europe from the U.S. in search of lower tax rates. Republicans constantly call for the corporate tax rate to be lowered as a way to keep companies from moving. But they steadfastly balk at eliminating loopholes that have allowed some 55 percent of corporations to pay no federal income tax at all.
Americans are not taking the Walgreens plan lying down. On July 24, protesters in Chicago, where Walgreens is based, delivered a petition to the company with the online signatures of over 70,000 who oppose the move. Last week, President Obama criticized moves such as this, calling these companies “corporate deserters.”
What can you do?
I have been a Walgreens customer since the chain bought out a local drugstore chain in my community. I wrote an email to CEO Wasson, outlining my objections to the move. You can contact him at [email protected]
If you would like to see the email I sent, you can find it on my blog, LeftOfLiberal.net.
Here is a report on the Chicago protests from Chicago station WLS:
Featured photo: Progress Illinois.