June 24, 2014  |  

Walgreens’ Continued Consideration of Tax Inversion Draws Criticism

Barclays estimates Walgreens could save $797M a year by renouncing its U.S. citizenship and changing its address to a tax haven


WASHINGTON—During its third quarter earnings call today, Walgreens reiterated that it could undertake a controversial tax inversion as part of its acquisition of Swiss-based pharmacy giant Alliance Boots. Walgreens is under pressure from Alliance Boots leadership and several large hedge funds to avoid taxes by re-incorporating in Switzerland, but the move is drawing increased criticism from consumers and elected leaders.

“It is deeply disturbing that Walgreens would even consider this unpatriotic move to avoid paying its fair share of taxes. What will its customers say?  The company profits from billions in taxpayer dollars every year, but appears to be putting the interests of Wall Street hedge funds ahead of the American people,” said Frank Clemente, executive director of Americans for Tax Fairness.

“Walgreens faces several obstacles to undertaking an inversion, including growing political opposition to companies exploiting this tax loophole,” said Nell Geiser, associate director of Change to Win Retail Initiatives. “Will Walgreens—a company which relies on taxpayer supported programs for nearly a quarter of its revenue—risk the mounting political and consumer blow black against tax avoidance?”

Americans for Tax Fairness (ATF) and Change to Win Retail Initiatives released a report earlier in the month that estimated an inversion by Walgreens could cost taxpayers $4 billion in lost revenue over five years should the company decide to renounce its American corporate legal status. A Barclays analyst report released last week estimated a similar cost to taxpayers of a Walgreens inversion, nearly $800 million in 2016 and growing each year thereafter.

In addition to criticism from tax fairness groups, Congressional action to restrict inversions is gaining momentum, and Senate Finance Committee Chairman Ron Wyden has said that such a provision could be retroactive, thus making a Walgreens inversion subject to reversal. Senator Dick Durbin (D-IL) announced a bill yesterday that would cut loopholes for corporations moving jobs overseas.

“Walgreens is another example of an upcoming wave of U.S. companies which, unless we act, will reincorporate abroad to avoid paying their U.S. taxes,” Sen. Carl Levin (D-MI) has noted. Levin has introduced anti-inversion legislation in the U.S. Senate.

In addition to political hurdles, the current Walgreens-Alliance Boots deal structure may need to be renegotiated to meet IRS standards for an inversion, including a somewhat larger transfer of ownership to foreign hands.

During the earnings call the company refused to give specifics about a potential tax inversion, diverting questions to a future meeting in late July or early August.

Walgreens currently has a 45 percent stake in Alliance Boots, and could acquire the rest early next year. Walgreens announced today that it was withdrawing its FY 2016 performance goals for the merger. Alliance Boots reported anemic annual results in May.


Americans for Tax Fairness is a diverse coalition of 425 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.

Change to Win Retail Initiatives is a project of the Change to Win labor federation. Since 2005, it has been an active stakeholder in the pharmacy industry, advocating on behalf of workers and the general public for consumer protections, health care access, tax fairness and other safeguards to rebuild the middle class.