Walgreens Going For the Green?

Tax group says nation's biggest drug-retail chain is trying avoid $4B in taxes.
5:05 | 06/11/14

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Transcript for Walgreens Going For the Green?
-- -- It is Wednesday June 11 the New York markets are open -- today's big number is four billion dollars that's how much Walgreens woods. Save in taxes over the next five years of the drugstore chain re incorporates in Switzerland. This according to a controversial estimate by the group Americans for tax fairness. Hello everyone I'm Michelle Franzen in New York here with all those details -- and toll of Yahoo! finance. First of all Mike explain what Walgreens reportedly has in mind something called a tax -- what is that. -- -- the inversion would be Walgreens is acquiring alliance boots was as a Swiss based largely British drugstore chain this deal has been in the works for some time now. And if it -- big enough of an acquisition that it would allow Walgreens to legally change its technical corporate headquarters to Switzerland and thereby kind of lower its tax -- -- Swiss. Corporate tax rates are much lower than those in the US which -- now. Adheres to so essentially would mean kind of on paper. Moving the corporate headquarters to Switzerland saving a lot in taxes in doing so. And you of course have been following this doing some reporting and have a few concerns about that four billion dollar figure. -- the four billion dollar figure I mean you know that the tax group is trying to sort of maximize the potential financial impact here to the US treasury and therefore -- savings so they do have some methodology -- taking Wall Street estimates of how much Walgreens might save per share. Next year they managed to get their tax rate down to 20% from -- 30%. And any kind of extrapolate that over five years. Using some estimates of earnings growth over that period it's not. -- it's not easy to really substantiate that four billion dollar number exactly. But what's very very clear is that it would be a lot of money. And that Walgreens only motivation for doing it really. Would be to save money in taxes and therefore pay less taxes in the US where the majority of its business still remains in whereas the group points out it sort of benefits from a lot of government programs such as payment for prescription medications. And Walgreens of course wouldn't be the first to do this let's discuss the real issue of -- -- version according to Bloomberg about 41 US companies. Have -- incorporated in lower tax countries since 198211. In the past few years we're looking at a couple of them now. Of course it's legal but garnered these companies also taken advantage of a loophole. While the other taking advantage of a provision in US tax law which says if a US company acquires a foreign company that is at least 25% of its own size. That it is legally able to consider a tax inversion and sort of just -- to that. New countries domicile said this is a mean you can caught a local -- -- -- -- called the letter of the law what it is is just on paper moving. Your corporate headquarters for the sole purpose really are sitting on -- -- a lot of the companies if you remember Pfizer was attempting to acquire. After -- and a hundred billion dollar deal and in doing so was going to move its headquarters to the UK. For tax reasons. Now that need -- -- more sense because Pfizer like many large multinational US companies has built up a lot of cash overseas. In foreign earned profits -- they don't want to bring back the United States because they would have to incur the higher US tax rates on that cash. Doing the inversion would enable them to essentially we claim that cash and use it for acquisitions or whatever they would like. What we -- not really in a position Walgreens right now is basically domestic US business that's acquiring a -- a one so it's not as if they're tapping into some cash that they've -- Over the years so it's -- slightly different situation but using the exact same tax provisions. -- loophole to some letter of the law by others why though our lawmakers not stopping. US companies from being able to -- this. Well interesting question because it's bound up in the entire debate over US -- corporate tax reform which really is completely bogged down right now almost everyone -- mother. Yeah almost everyone agrees that we we really should kind of recast the corporate US tax code. -- -- wholesale way and so lowered the rates and get rid of a lot of these individual. Kind of credits and provisions and loopholes. That many many industries benefit from. But the problem is. You really do need to close all those in pay for. The the lower tax rate somehow and there's not a lot of appetite in Washington to do that either on the legislative side or certainly on the industry -- -- everyone wants a lower rate. Nobody wants to give anything up it's just like -- to -- individual basis tax and tax simplification sounds great idea until you tell somebody maybe you'll be able -- -- mortgage interest so. That's where we are right now and until we get any kind of movement in Washington which nobody really expects right now I do think this. This loophole will enable and probably encourage tax -- versions to continue. -- and toll from Yahoo! finance thank you for joining us aren't you of course can keep up with the latest headlines right here on abcnews.com. Even watching the big number I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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