I. Introduction
There are two things in life that are certain: death and taxes.
Corporations have successfully cheated the former by achieving
perpetual life. And, from their births, it seems like corporations
have also been doing their darndest to avoid the latter. Offshore
affiliates have become a popular corporate technique for avoiding
income tax.[1] Recently, Merck has been investigated for putting its
own unique spin on the traditional offshore affiliate.
II. Analysis
In 1993, Merck in conjunction with a British bank entered into a
Bermuda partnership whose assets were substantially comprised of the
soon-to-be-valuable patents behind cholesterol-lowering medications
Zocor and Mevacor.[2] In creatinig this partnership, Merck engaged in
a practice called "inversion:" a method of reorganization wherein a
domestic corporation reorganizes itself to become a subsidiary of a
foreign parent entity, thereby rendering any profits generated by the
foreign business operations outside of the reach of the federal income
tax.[3]