WASHINGTON—Sen. Dick Durbin D-Ill. wrote a stinging letter to the chairman of Walgreensas the Deerfield-based company votes soon on whetherto relocate its headquarters to Switzerland to avoid U.S. taxes. Durbin deplored the tactic—called a “corporate inversion” – on the Senate floor late Tuesday, slamming the North Chicago based AbbVie for planning to reincorporate in Britain while still being run out of its massive Lake County complex.
On the Senate floor, Durbin called the moves “positively un-American tax dodges.” AbbVie, said Durbin was a “company that has been profitable and made billions of dollars in America now wants to lessen its American tax bill by moving overseas on paper.”
Durbin mocked the Walgreen’s slogan, “at the corner of happy and healthy” in his letter to Walgreens CEO and President Gregory D. Wasson and the Walgreens board.
Wrote Durbin, “Is “the corner of happy and healthy” somewhere in the Swiss Alps?”
RELATED:Walgreen’s Swiss switch idea tied to tax savings, but some see clouds with inversion
Durbin sent a letter along the same lines to AbbVie—a spinoff of Abbott Laboratories—in the wake of the pharmaceutical company buying Shire, a rival based in Ireland.
Durbin is trying to pressure Walgreens to reconsider making the move—triggered by its purchase of Alliance Boots, a European drug store chain– with his stinging attack on the company, coming as the Obama administration is also raising concerns about sending headquarters overseas to dodge taxes. Walgreens was started by Charles Walgreen Sr. in 1901, with the first store on Chicago’s South Side.
Michael Polzin, a Walgreens spokesman said in a statement, “We’ve had a long relationship with Sen. Durbin and appreciate his view on this subject. As we’ve said before, we are in the process of evaluating all aspects related to the second step of our strategic partnership with Alliance Boots, and we will do what is in the best long-term interests of our customers, employees and shareholders. We expect to announce details around these issues in late July or early August.”
Walgreens may loose customers over the move, Durbin warned Wasson.
“Customers have many choices about where to shop and where to have their prescriptions filled. I believe you will find that your customers are deeply patriotic and will not support Walgreen’s decision to turn its back on the United States. Nearly all of your $2.5 billion in profits earned last year were from sales to U.S. taxpaying customers,” Durbin said.
“Walgreens could dodge an estimated nearly $4 billion in taxes over the next 5 years, if your company inverts. I recognize that potential windfall in profit is an attractive option for shareholders. On the other hand, much of Walgreens financial success was built on programs and infrastructure provided by the U.S. government and paid for by U.S. taxpayers. The future success of Walgreens will continue to depend on U.S. taxpayers and government-funded programs, yet Walgreens will be using a clever tax dodge to avoid paying $4 billion in US taxes
“Further, it is not clear to me how you can in good conscience build a profitable company using these public assets and then organize your financial holdings specifically to avoid paying taxes on those profits,” said Durbin.
In addition, “Nearly 25 percent of Walgreens profits were from U.S.-funded Medicare and Medicaid programs. Walgreens uses taxpayer-supported transportation infrastructure to stock its stores and deliver its products. Your company benefits from our country’s investment climate and educated workforce, and you and your fellow executives have benefited from tax breaks on compensation packages. If you and Walgreens’ board of directors decide to invert to avoid U.S taxes, you will be turning your backs on the very people that have allowed Walgreen’s to thrive and prosper,” Durbin wrote.
Disclosure: I own shares of Walgreens stock.