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Walgreen Co. blasted for its anticipated move to Europe

By McClatchy News Services

POSTED:
LAST UPDATED: 02:16 a.m. HST, Jul 05, 2014


Walgreen Co. is at a crossroads, but it may not be "at the corner of happy and healthy" as its advertising slogan suggests.

The nation's largest drugstore chain is considering a move that would allow it to significantly cut its tax bill and increase profits. But it's being painted by critics as un-American for looking to make money for shareholders through financial engineering at the expense of the communities that it grew up in. Walgreen is considering a so-called corporate tax inversion, in which an American company is able to incorporate abroad by acquiring a foreign company. The buyer, in effect, becomes a subsidiary of a foreign parent.

Walgreen would accomplish an inversion by completing its purchase, which is expected to happen in early 2015, of Swiss-based Alliance Boots and moving its corporate home to Europe's largest pharmacy chain.

The Deerfield, Ill.-based company faces a tough choice, one in which it must balance profits with corporate social responsibility. By going ahead with an inversion, Walgreen would give ammunition to critics who claim the company is essentially renouncing its U.S. citizenship.

The decision could alienate the consumers who put their confidence in the chain since its inception in 1901, making it one of America's trusted brands.

Millions of people depend on Walgreen to dispense their prescription drugs safely and responsibly. Its more than 8,000 pharmacies are everywhere — one-stop convenience stores where you pick up your Lipi­tor as well as your lipstick. The company likes to say that 75 percent of the American population lives within five miles of a Walgreens store.

The average person who pays taxes cannot take advantage of the tax loopholes exploited by corporations, and they don't think it's fair, said Klaus Weber, associate professor of management and organizations at Northwestern University's Kellogg School of Management.

"I do think people now more than before care because of rising issues of income inequality and justice and the fact that large companies have come under more scrutiny," Weber said. "People expect corporations to fulfill their citizen duties as taxpayers like everyone else."

While several U.S. companies have moved to lower-tax countries since 2012, Walgreen has caught the attention of taxpayer groups and unions that have criticized the potential tax maneuver. They have blasted Walgreen for contemplating fleeing the United States even though it benefits from government insurance programs. Nearly one-quarter of Walgreen's $72 billion in sales in its last fiscal year came from Medicaid and Medicare, according to a report by Americans for Tax Fairness and Change to Win Retail Initiatives, a union-backed group.

By Ameet Sachdev, Chicago Tribune






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