By reincorporating to Ireland, Chiquita would be dissolving its United States incorporation, and would therefore no longer be beholden to U.S. tax laws.
Are you a fan of Chiquita bananas? If so, brace yourself, because they could become quite controversial in the upcoming months.
According to a report from the Huffington Post, Chiquita is planning to leave the United States and move operations to Ireland, all to avoid high United States tax rates. But companies that have recently tried to leave U.S. soil for tax purposes have been the targets of fierce protests and boycotts, and the same would likely happen to the Chiquita brand if the company does indeed reincorporate to Ireland.
Currently, Chiquita is based in North Carolina, but the company has been receiving notable attention from foreign companies as of late. Just this week, Chiquita turned down a buyout bid from a Brazilian corporation that totaled $625 million.
Chiquita’s rejection of the Brazilian bid has nothing to do with American pride, though. Instead, Chiquita is looking to complete merger with Fyffes, a former Irish rival that the banana company officially acquired in March. With the acquisition complete, Chiquita is free to consolidate the bulk of its operations to Ireland, and more importantly, register itself there for tax purposes.
This practice is not anything new. On the contrary, the concept, known as “tax inversion,” has become more and more common in recent years. Essentially, tax inversion happens when a company reincorporates their business overseas. In other words, by reincorporating to Ireland, Chiquita would be dissolving its United States incorporation, and would therefore no longer be beholden to U.S. tax laws. Companies often pursue tax inversion when their earnings from foreign markets are substantial, as these revenues are taxed in both the country of sale and in the United States.
Chiquita is not the first company to plot an inversion deal. Just recently, Walgreens was planning to reincorporate to Switzerland to reduce tax burden, but vicious threats of boycotting convinced the company to abandon the plan. Walgreens would have saved $4 billion in tax dollars in the next five years if it had completed the reincorporation. Chiquita, on the other hand, is being tight-lipped about the benefits it would get from moving to Ireland, though a tax expert told the Huffington Post that the banana giant would at very least avoid paying taxes on about $1.7 billion of existing offshore profits if it executed a quick move.
But if Chiquita is to move, then the company will likely face a hard road to do so. President Obama has said that he wants to close the loophole that makes tax inversion possible, and U.S. citizens will likely threaten to boycott Chiquita bananas if reincorporation does happen.
Leave a Reply