In January, when Aon Corp. made the major announcement that their corporate headquarters would be moving to the UK from the USA, their statement said: “The move provides greater access to emerging markets and takes better advantage of the strategic proximity to Lloyd’s and the London market as one of the key international hubs of insurance and risk brokerage.” However, as 2012 has passed by there are people speculating that, in truth, the move was to avoid paying the almost 40% corporate tax rate (the highest in the world) that the USA requires.
Such speculation has intensified as two other corporate powerhouses have declared their intentions to relocate from the USA as well: electrical equipment maker Eaton Corporation is planning on finishing off a merger that would land it in Ireland instead of Ohio and Pentair, the water technology company, recently made the move from Minneapolis to Switzerland.
While there are other reasons being listed for the moves of these companies, tax laws seem to be the common thread in all three cases and experts have pretty much universally agreed that this was the overriding motivation for relocation in each occurrence.
The question now becomes whether this trend, disturbing as it might be to the US financial community, will persist. There continues to be calls to reform the tax codes of America and, without doing so, many professionals believe that this trend will indeed keep up and that major corporations will pursue the possibility of fleeing America for the potential to save up to several million dollars in taxes by relocating to places such as the UK. As the United States Presidential election draws upon us and the economy continues to be one of the biggest concerns (if not the biggest) among voters, the pressure will only be turned up on decision makers to lower these corporate tax requirements by at least 15% and to make the final amounts more competitive with the rest of the world.
It would appear that, as the pundits have suspected, whichever Presidential candidate chooses to embrace the potential of tax reform stands to get a very big leg up on the coming race.