Congress Likely to Address Tax Dodging Mergers

Warren Buffett said “you are getting more mergers that are tax driven” and he said that Congress is “likely to address” this issue.

When responding to a question about Pfizer’s bid to purchase the foreign drug maker AstraZeneca, partially to reduce its tax build in the United States by moving overseas, Buffett tells us that the trend “will gather momentum and my guess is that when you do get to companies of this size, of this prominence, and with the speedup of momentum, my guess is that Congress, one way or another, addresses this. But that could go either direction in how they address it.”

Warren Buffett made an appearance in a live interview on CNBC from Omaha with Becky Quick on CNBC’s “Squawk Box” following the shareholders meeting for Berkshire Hathaway a few weekends ago.

Buffett said that Congress might focus on a small section of the tax code that gives the company the ability of merges to move its tax domicile, or “that forces them to rethink all corporate taxes, we’ll find out. But I do think it will get attention.”

“The whole thing on the foreign situation, I think, will cause one hell of a fight in Corporate America.”

Buffett tells us that he wants all companies to pay the exact same tax rate, but those companies that would see their tax rates go up would “squeal” a lot more than the companies that will see a tax reduction.

Regardless, “I think there may be enough action going on now that despite what I said you will get some new resolution on corporate taxes generally beyond the question of just foreign tax rates, but it will take a lot” because the opposition will have “lobbyists lined up from Washington to Baltimore.”

Buffett mentions that he does not have any interest to move Berkshire Hathaway overseas in an effort to cut its tax bill. “We do not feel that we are unduly burdened by federal income taxes. But it does get a little annoying to us when we see other people paying far lower tax rates while engaging in the same sorts of businesses that we engage in.”

Buffett also went on to say that Berkshire Hathaway did well when it paid 48% and 52% tax rates and “we make a lot of money under US tax rates” right now.

Buffett said that he is not going to favor reform that would lower the overall corporate tax revenue in order to make United States companies more competitive on a global scale. “If you look at corporate taxes as a percentage of GDP since World War II, they’ve come down from 4% to… Under 2%… Corporations are doing fine in the United States… And not having any trouble competing.”

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