MASSDEVICE ON CALL — Medtronic’s (NYSE:MDT) acquisition of Covidien (NYSE:COV) has spurred hundreds (if not thousands) of articles, analyses and speculations but at least one political hopeful is using the blockbuster news to gain favor in Medtronic’s home state.
Minnesota Republican and candidate for governor Marty Seifert issued a press release on Sunday blaming the Obama Administration for chasing Medtronic out of the U.S. with the medical device tax. Seifert is running for office against incumbent Mark Dayton (D), who has held the governor’s office since 2011.
"Because of the failed policies of Mark Dayton and Barack Obama’s destructive medical device tax, companies like Medtronic are forced to look outside of Minnesota to continue doing business," Seifert said in prepared remarks. "This is a sad day for our state’s economy and its workforce. Rather than inventing things in their parent’s garage, like the founders of Medtronic did, our young people are now more likely to live in their parent’s garage than become innovators."
Although companies such as Medtronic have warned against the harmful effects of the medical device tax, saying that the 2.3% levy hurts jobs and cuts into R&D budgets, the overseas move is a measure that’s been increasingly popular companies in a variety of industries because it allows them to dodge a much larger corporate tax.
Covidien moved its headquarters to Ireland in 2009, saying that the company hoped to benefit from the lower corporate tax rate there, and Medtronic plans to make the same move once the merger closes later this year or early in 2015. The shift would allow Medtronic to tap the billions is stores in outside-U.S. tax havens without having to pay U.S. corporate taxes upon repatriation, Forbes reported.
Medtronic has maintained, however, that the merger with Covidien isn’t driven by the tax incentive of an Irish incorporation, but by the strategic fit of the two industry giants.
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