Inversion (n): The process by which U.S. companies acquire foreign competitors and reincorporate abroad in low-tax countries.
Example of inversion: Pfizer is trying to buy British rival AstraZeneca for about $106 billion. Pfizer plans to move its holding company to Britain from the United States so it can achieve a much lower tax rate and use cash that it has held abroad to avoid paying U.S. taxes.
According to NYT reporter Andrew Ross Sorkin, “By reincorporating in Britain, Pfizer would most likely save about $200 million a year for each percentage point less it pays in taxes, according to Barclays. Pfizer paid a 27.4 percent rate in the United States; AstraZeneca paid about 21.3 percent in Britain. Those six percentage points could turn into an annual windfall of more than $1 billion. That’s not all: It gives Pfizer a revenue-generating asset without having to repatriate any of its $57 billion cash hoard sitting overseas.”