MINNEAPOLIS (WCCO) — Minnesota-based Medtronic shocked the business world on Sunday.
The giant medical device maker is buying a similar company in Ireland for $43 million.
The reason? Hundreds of millions of dollars in tax savings.
Medtronic’s humble beginnings in a Minneapolis garage are an American business legend. Now, it’s moving headquarters to tax-friendly Ireland, but company spokesman Chris O’Connell says they’re still calling Minnesota home.
“Medtronic was born in Minnesota, Medtronic lives in Minnesota and Medtronic will continue to expand in Minnesota,” O’Connell said.
Medtronic’s not alone. To escape U.S. taxes on worldwide income, 41 American companies have moved to foreign countries since 1982 – and 11 of them since 2012 alone.
The United States has a top corporate tax rate of 35 percent, the highest in the world. By comparison, Ireland’s tax rate is 12.5 percent.
For companies like Medtronic, the tax savings could be huge. Companies incorporated in foreign countries, like Ireland, only pay U.S. taxes on income generated inside the U.S.
According to Forbes Magazine, Medtronic will see $850 million in cost savings by fiscal year 2018.
Even though the top U.S. corporate tax rate is 35 percent, critics say most American corporations don’t pay anything near that amount. And most pay far less because of loopholes and deductions.
Bloomberg reports that between 2011 and 2013, Medtronic paid an effective tax rate of about 18 percent.
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