Home-Country Effects of Corporate Inversions

73 Pages Posted: 28 Aug 2014 Last revised: 20 Jan 2016

See all articles by Omri Y. Marian

Omri Y. Marian

University of California, Irvine School of Law

Date Written: October 21, 2014

Abstract

This Article develops a framework for the study of the unique effects of corporate inversions (meaning, a change in corporate residence for tax purposes) in the jurisdictions from which corporations invert (“home jurisdictions”). Currently, empirical literature on corporate inversions overstates its policy implications. It is frequently argued that in response to an uncompetitive tax environment, corporations may relocate their headquarters for tax purposes, which, in turn, may result in the loss of positive economic attributes in the home jurisdiction (such as capital expenditures, research and development activity, and high-quality jobs). The association of tax-residence relocation with the dislocation of meaningful economic attributes, however, is not empirically supported and is theoretically tenuous. The Article uses case studies to fill this gap. Based on observed factors, the Article develops grounded propositions that may describe the meaningful effects of inversions in home jurisdictions. The case studies suggest that whether tax-relocation is associated with the dislocation of meaningful economic attributes is a highly contextualized question. It seems, however, that inversions are more likely to be associated with dislocation of meaningful attributes when non-tax factors support the decision to invert. This suggests that policymakers should be able to draft tax-residence rules that exert non-tax costs on corporate locational decisions in order to prevent tax-motivated inversions.

Keywords: Inversions, Corporate Tax, International Tax, Tax Reform, Comparative Tax

JEL Classification: E62, H25, H32, K34

Suggested Citation

Marian, Omri Y., Home-Country Effects of Corporate Inversions (October 21, 2014). 90 Washington Law Review 1 (2015). Available at SSRN: https://ssrn.com/abstract=2487664

Omri Y. Marian (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

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