Some of the arguments presented in the Aug. 19 news article “ ‘Inversions’ don’t always benefit investors” are misguided. The true criterion for determining whether an inversion results in “superior returns for investors” is not how its stock performs but whether the firm’s profits increase. The reduction in taxes may not be as large as some might think for companies that do most of their business in the United States because the profits from their U.S. operations are still taxed at the U.S. rate. The inversion strategy is primarily designed to enable a corporation to bring its already-taxed foreign profits back to the United States without having them taxed again.
The inversion strategy is designed to reduce a firm’s tax bill and cannot generally be expected to result in a long-term increase in the firm’s stock price, which is primarily determined by the level of demand for the firm’s products. The notable exception is firms that depend on U.S. government contracts. Those firms’ decisions on where to locate can be greatly affected by “public criticism from politicians.”
Victor Cholewicki, Washington