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Aon to sidestep Treasury's proposed inversion regulations, CFO says


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Aon to sidestep Treasury's proposed inversion regulations, CFO says

will continue usingintercompany debt to fuel its investments in the U.S. despite proposedregulations cracking down on the so-called earnings stripping tactics employedby foreign corporations.

The U.K.-basedinsurance broker during its first-quarter earnings call dismissed the Treasury Department's latesteffortsto limit inversion transactions, saying that the new rules would have littleeffect on its tax status or business operations. The company redomiciledoutside of the U.S. four years ago and would not qualify as an inversion, andthe proposed regulations on intercompany debt would only apply to debt placedafter April 4.

"Overallwe feel really comfortable with our current effective tax rate for theforeseeable future," CFO Christa Davies said on the April 29 call."We have an overall capital structure and we use intercompany debt as onepart of that to help drive investments globally."

Foreign-domiciledcompanies that do much of their business in the U.S. are facing fresh scrutinyfollowing a series of so-called inversion deals, where a U.S.-based companypurchases a foreign entity but then moves its headquarters to that country. Thetransactions are aimed at least in part at housing the combined company in acountry with a lower tax rate. Aon transferred its domicile to the U.K., from Delaware, inApril 2012.

TheTreasury Department's proposed regulations would also target earnings strippingstrategies, which minimize a company's U.S. taxes by paying deductible intereston loans to a foreign parent or affiliate. That can involve the use ofintercompany debt.

ButDavies maintained that Aon would sidestep all of potentially new limits,calling its use of intercompany debt a "core" part of its operations.

"Weabsolutely think about intercompany debt similar to third-party debt," shesaid. "We manage it in terms of coverage and leverage ratios, as you wouldexpect, and we really have a global capital structure that looks like any otherforeign-based company in a territorial tax system."