The Obama administration’s new rules intended to stem the tide of inversions, in which U.S. companies reincorporate abroad to dodge taxes at home, won't be completely effective because they don't address the high corporate tax rate in the U.S. that compels such behavior, say tax experts and analysts. 

The rules announced late Monday will make it tougher for American companies to move their headquarters abroad on paper while maintaining U.S. operations and will reduce tax benefits to companies that have done so. Inversions have become more common in recent years, especially in the pharmaceutical and medical device industries. Companies that have inverted left behind the 40 percent corporate tax rate in the U.S., the highest of any major developed economy, to instead pay taxes to the government of their new headquarters, as low as 12.5 percent, in Ireland.

Under so-called hopscotch loans, American companies that had become foreign corporations would borrow money from foreign subsidiaries, skipping the U.S. unit, then sometimes use the cash to repurchase shares of their U.S. units, providing them with a non-taxed income stream. The Treasury Department’s recent rules shut down that option, which has been a primary motivator of many recent inversions, said Martin Sullivan, chief economist at Tax Analysts.

“It’s very difficult for a company to invert now,” Sullivan said. “They’ve created enough uncertainty around these deals to make it very difficult to take place.”

But the recent crackdown won’t keep inverted companies from using a number of other techniques to reduce their tax bills, and for some companies, the benefits of inversion may still outweigh the costs and risk deriving from the new rules. 

“Treasury has precluded certain techniques, but there are probably other techniques that firms can use to do these transactions to minimize their liability,” said Howard Gleckman, senior research associate at Tax Policy Center of the Urban Institute and Brookings Institution. “They usually close one door and leave another door open. I suspect there are a lot of tax lawyers trying to figure out today which doors are open.”

One such open door is called earnings stripping, when companies pay tax deductible interest on loans from foreign units. The Treasury discussed the loophole but chose not to act on it—yet. Other tax avoidance techniques, like using derivatives, forward contracts and rolling loan programs don’t require inversions and though monitored by the IRS, are legal.

“These rules limit techniques, but the incentives [for companies to invert] haven’t changed,” said Sam Lichtman, a partner in the Tax Practice Group in the New York office of Haynes and Boone, LLP. “It doesn’t enable U.S. multinationals to better compete with their foreign multinational competitors.”

Over the past two decades, the corporate tax rate in the U.S. hasn’t budged, while many developed economies have lowered their tax rates, data compiled by KPMG shows. In Canada, where Burger King has announced it will relocate and merge with coffee -and-donut chain Tim Hortons, the corporate tax rate has fallen from 36 percent in 2006 to 26.5 percent.

"If a company has significant foreign investment and earnings, they’re unable to access capital without paying a U.S. income tax," said Dean Sonderegger, an executive at the software segment of Bloomberg BNA, which publishes legal and business information. “The things done by Treasury are going to make it more difficult, but companies are still going to invert for the number of benefits that still exist."