If Walgreen wants to save a mountain on taxes by moving to Switzerland, it had better get ready for an avalanche of criticism.
The drugstore giant could save $4 billion in federal taxes over the next five years by reincorporating in Switzerland, according to a report to be released Wednesday.
The artful tax dodge has been advocated by a cadre of shareholders, including billionaire Barry Rosenstein, who this spring shelled out $147 million for a Hamptons beach house, the highest-ever price tag for a private US residence.
But the move could also cause a major public-relations headache for Walgreen, according to the study compiled by Americans for Tax Fairness, a Washington think tank.
That’s because Walgreen gets nearly a quarter of its revenue from US taxpayer-funded Medicare and Medicaid programs, the report calculates — not to mention millions in federally subsidized bonuses enjoyed by top Walgreen execs.
“Many Americans will find it unfair and deeply unpatriotic if the company moves offshore, while continuing to make its money here, leaving the rest of us to pick up the tab for its tax avoidance,” said Frank Clemente, executive director of the think tank.
The overseas move, known as a “tax inversion,” was a key feature in Pfizer’s recently thwarted $100 billion merger proposal with UK drug giant AstraZeneca.
In the case of Walgreen, it’s being pushed by investors including Rosenstein’s Jana Partners, Och-Ziff and Corvex, who in April met in Paris to discuss the idea with Walgreen brass, including CEO Greg Wasson.
Goldman Sachs Investment Partners also attended the Paris meeting, but the fund isn’t advocating the tax move, said bank spokeswoman Andrea Raphael.
Representatives at the other firms declined to comment.
Walgreen officials didn’t respond to requests for comment. The retailer has recently said it has “no plans” to reincorporate in Europe for tax purposes.
Nevertheless, Walgreen reportedly has been pressured by Italian billionaire Stefano Pessina to try the Swiss tax dodge as it plans to take control of British drugstore chain Alliance Boots.
Walgreen, which bought 45 percent of Alliance Boots in 2012, is expected to complete a merger with the chain next year.
Pessina, chairman of Alliance Boots, already has reincorporated the British chain in Switzerland — a move that spawned picket protests outside London-area Boots drugstores.
If Walgreen attempts a Swiss move, it might spur the same kind of dyspepsia among its own customers, Wednesday’s report suggests, noting that the Illinois-based company has won $46 million in state tax breaks over the past decade.