Prof. Vaaler Comments on Medtronic's Covidien Deal in Local Media

Professor Paul M. Vaaler commented on motivations for Minnesota-based medical device maker Medtronic's proposed acquisition of another medical products giant, Covidien PLC, in local media outlets: KSTP Television and the St. Paul Pioneer Press. Vaaler emphasized the importance of so-called "tax inversion" deal terms permitting Medtronic to re-domicile its corporate headquarters for tax purposes in Ireland where the corporate tax rate is substantially lower than in the United States. This, in turn, would decrease the cost of repatriating billions of U.S. dollars Medtronic and Covidien currently hold in their foreign subsidiary operations. This change in domicile for tax purposes is unlikely to lead to any material reduction in people and investment in Medtronic's Minnesota-based operations, including its headquarters operations. Indeed, Medtronic has announced its intention to increase both in the near term. Re-domicile in tax haven countries like Ireland is increasingly attractive for U.S. firms generating substantial revenues outside the U.S. given relatively high (compared to other industrialized countries) U.S. federal corporate marginal tax rates that top out in the 34-39% range. A key condition for completion of the deal later in 2014 or early 2015 is continuation of current U.S. laws and Internal Revenue Service rules permitting the tax inversion advantage.