Here's a turkey just in time for Thanksgiving. The huge American pharmaceutical company Pfizer is up to it's tricks again:
Pfizer Inc on Monday said it would buy Botox maker Allergan Plc in a deal worth $160 billion to slash its U.S. tax bill, rekindling a fierce political debate over the financial maneuver.
The acquisition, which would create the world's largest drugmaker and shift Pfizer's headquarters to Ireland, would also be the biggest-ever instance of a U.S. company re-incorporating overseas to lower its taxes. U.S. President Barack Obama has called such inversion deals unpatriotic and has tried to crack down on the practice. (our emphasis)You may recall a series of these corporate tax- dodging "inversion" deals from last year (one of which involved... Pfizer). Alan Sloan provides some perspective:
Assuming this deal goes through, Pfizer PLC will pay lower income taxes while continuing to enjoy all the benefits that it and its employees derive from being in the United States. The U.S. corporate tax rate is 35 percent, compared with 15 percent for Ireland. But Pfizer, like many U.S. multinational companies, uses a variety of strategies to lower its tax rate considerably.
This is a very scary transaction. Not only is Pfizer big and prominent — it would become the first foreign member of the Dow Jones industrial average, the quintessential U.S. market indicator — but it takes tax avoidance to a whole new level. Once people examine the technicalities underlying this deal, other companies may well be inspired to structure their desertions the same way Pfizer has.
Because of the deal’s structure, as I will explain in a bit, Pfizer PLC will be able to play amazing tax games. Among other things, it will be able to get its hands on about $70 billion of profit it has held offshore to avoid paying U.S. income tax on it. Now, it will be able to access the cash without paying the tax. And it will probably be able to add to its reported profit some or all of the $20 billion it has set aside on its earnings statement for U.S. taxes on those foreign earnings — taxes that will now never have to be paid. (our emphasis)Doing a little checking here =taptapclickclick= 35% (current U.S. corporate tax rate) of $90 billion profit equals $31.5 billion maximum tax liability avoided. Now that's a real "taker!" Check out the rest of Sloan's article (but take your blood pressure medication first).
Thinking that Congress will do anything to stop this type of corporate tax weaseling would be to grossly misjudge our compromised legislative branch. Speaker Paul "Lyin'" Ryan (R- Galt's Gulch) is probably handing out Pfizer checks on the House floor right now.