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Businesses Government The Almighty Buck United States

With $160 Billion Merger, Pfizer Moves To Ireland and Dodges Taxes (arstechnica.com) 365

ourlovecanlastforeve writes: In a $160 billion dollar acquisition, drug company Allergan, a small company based in Ireland, "purchased" Pfizer, allowing the drug producing giant to move to Ireland and lower its tax rate from about 25 percent to 17-18 percent. Ars reports: "Such inversions, which are said to cost the American government billions in lost tax revenue, have drawn scorn from the Obama Administration and the Treasury Department. Last year, President Obama referred to the deals as 'unpatriotic' loopholes and proposed to close them. And last week, the Treasury announced new rules to make such deals more difficult. But Pfizer’s reverse-inversion skirts the rules, in part by keeping ownership split somewhat evenly between the two companies. After the deal is complete, current shareholders of Allergan, which has the majority of its operations in the US, will own 44 percent of the mega company. The remaining 56 percent will be owned by current Pfizer shareholders."
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With $160 Billion Merger, Pfizer Moves To Ireland and Dodges Taxes

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  • Novel Idea (Score:3, Insightful)

    by schmaustech ( 766915 ) on Monday November 23, 2015 @07:55PM (#50989853)
    How about we just lower our tax rate to 15%? We would then be a favorable place to have business and while not cashing in on $0 at the higher rate we would at least cash in on some taxes.
    • What do you do (Score:5, Insightful)

      by rsilvergun ( 571051 ) on Monday November 23, 2015 @08:24PM (#50990041)
      when Ireland drops theirs to to 10%? I guess we could do 5%. Then they'd do 2 and a half, then we'll do 1 and they'll do -5% (e.g. incentives) and we can top that with -10%....

      See, this is what's called a "Race to the Bottom". The correct response is to tell Phizer: Thanks, and by. Then you slap a 50% tarriff on their drugs and enforce strict price controls. If that doesn't work you take their patents from them. If they stop "innovating" then fine. We hire folks to innovate in their place and tell them to go pound sand. What you do _not_ do is let them control negotiations and play their game. You will lose sir.
      • If they stop "innovating" then fine. We hire folks to innovate in their place and tell them to go pound sand.

        Do you think skilled scientists and engineers work just because you snap your fingers?

        What you do _not_ do is let them control negotiations and play their game. You will lose sir.

        No, people with your views will lose, because your views are simply untenable.

        See, this is what's called a "Race to the Bottom".

        No, what it is called is "labor mobility" and "competitiveness". That means, in the end, governm

        • Do you think skilled scientists and engineers work just because you snap your fingers?

          No, they work because they want money, and possibly also because they enjoy their profession. So, you make research grants, you pay them to work, and with a little luck you have innovation. You don't need Pfizer to make that work.

          No, what it is called is "labor mobility" and "competitiveness". That means, in the end, governments do not get to set the rules and cannot force people to work or invest under conditions that they don't like.

          No, it's called "taking advantage of our society for their profit". It's like using H1-B workers to make American profits using foreign labor prices.

    • We would then be a favorable place to have business

      The regulations are atrocious too. A sane tax rate is only part of the picture.

      It's OK, though - all the multinationals will soon be overseas companies and all the small businesses incorporated here will be hamstrung trying to compete uphill against their size, their tax advantage, and their regulatory advantage, and the fat cats and the DC politicians they own will all be perfectly content.

      Democracy is the theory that the common people know what they want

      • by DogDude ( 805747 )
        The regulations are atrocious too. A sane tax rate is only part of the picture.

        I hear this from Fox News drones all the time. I run a business, and I'm not familiar with any of these burdensome regulations. Care to be more specific?
        • Top 20 Burdensome Regulations on Business According to Heritage Foundation [heritage.org]

          It looks pretty horrific. It has terrible things in it like providing healthcare and taking care of the environment.


          • Healthcare for employees
            Bank Fees on Debit cards
            Credit Card Regulation
            Mandated Energy Efficiency (No more incandescent light bulbs)
            CAFE Standards
            EPA Environmental Standards
            Climate Change CO2 Legislation
            Community Reinvestment Mandates
            Financial Transparency Sarbanes-Oxley
            Network Neutrality
    • Corporate taxes [google.com] are not really an issue, in the grand scheme of things.
    • by TheSync ( 5291 )

      How about we just lower our tax rate to 15%

      That would be a start, but element #2 is not taxing US corporations on income earned outside the US (that income is already taxed by foreign localities). Every other country in the world operates on taxing corporations on income generated in their country, perhaps the US should join everyone else...

      • by orlanz ( 882574 )

        Foreign taxes can be credited against your US tax. So you don't pay "double". You just end up paying the greater of. Additionally, you only get taxed on the profits you recognize in the US company. So if you sell a widget to China using the YouCompany@China, then that company pays the Chinese tax. And when that company sends the profits to the US "owner" company, then the US company pays the taxes minus the tax amount paid on it in China.

        • That's only partly true, at least for individuals. Above a certain threshold you get the "pleasure" to pay taxes to the country you're residing in AND in the US. I believe that limit is about $97,000 - well within the earning of many tech workers...
    • 15% Flat rate would level playing ground and make it equal for both individuals, corporations both large and small.

      Reality is that Corporations dont like of competition, because middle class is paying upwards of 48% marginal tax (state plus federal plus medicaid/medicare etc).

      • by PopeRatzo ( 965947 ) on Monday November 23, 2015 @09:52PM (#50990711) Journal

        15% Flat rate would level playing ground and make it equal for both individuals, corporations both large and small.

        Rich people don't want their taxes to go up to 15%.

    • How about we just lower our tax rate to 15%? We would then be a favorable place to have business and while not cashing in on $0 at the higher rate we would at least cash in on some taxes.

      How about we just all just take a pay cut at our jobs and tithe 60% of our incomes to corporations to pay for their use of the commons so they will still love us and not run away like daddy did?

  • by Anonymous Coward on Monday November 23, 2015 @07:55PM (#50989857)

    Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.

    • be sneakier about it

      REQUIRE X percent of the production in each category to be earmarked for Medicare/Medicaid/VA use but give a credit at say 80% for tax paid.

    • Soft Power (Score:5, Insightful)

      by Etherwalk ( 681268 ) on Monday November 23, 2015 @09:33PM (#50990593)

      Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.

      You're thinking too small and you're risking a lot of lives. Don't forbid the payments; threaten the underlying patents.

      • And when Europe decides to ignore a whole lot of American drug patents in return?

        The reason the WTO exists is to try and avoid tit-for-tat trade wars like what you're suggesting. Ultimately they make everyone poorer.

        The US has an uncompetitive tax system for corporations. It's not even about the rate, it's about the fact that they're double taxed on worldwide income, something no other country does. Instead of coming up with creative ways to try and "punish" people who develop life saving drugs for getting

    • Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.

      You mean not reimburse Pfizer drugs through Medicare and Medicaid? Sounds like a good idea to me. Medicare and Medicaid should only reimburse generics anyway.

  • by Copid ( 137416 ) on Monday November 23, 2015 @08:26PM (#50990071)
    It seems like if we had any sense at all, we'd immediately dump the corporate income tax and replace it with a revenue-neutral increase in the capital gains and dividend taxes. The corporate shareholders ultimately end up paying any dollars that get paid anyway, and humans are much easier to tax than corporations are. A corporation is a shape-shifting non-entity that can "spend a year dead for tax purposes," so trying to change the laws fast enough to get any revenue out of them is a losing battle. All we end up doing is giving them an incentive to do ridiculous things like hold money in foreign accounts and set up subsidiaries all over the world to move revenue around. It's great for the tax lawyers and financial consultants, but it doesn't really get us any real revenue. It's the tax enforcement equivalent of the drug war.
    • An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"

      That's the best sig I've seen in quite awhile.

      • by Copid ( 137416 )
        Thanks. Somebody notices it and comments maybe once a year. I should hand out prizes to the people who figure it out.
  • by thrich81 ( 1357561 ) on Monday November 23, 2015 @08:50PM (#50990291)

    This is pretty bold (not really the right word) of Pfizer to move overseas, considering that they, along with the rest of big Pharma are the ones who lobbied to make it illegal for Americans to import cheaper prescription drugs. Maybe Pfizer should be required to sell their drugs in the USA for the price they charge in Ireland.

    • This is pretty bold (not really the right word) of Pfizer to move overseas, considering that they, along with the rest of big Pharma are the ones who lobbied to make it illegal for Americans to import cheaper prescription drugs.

      I think the word you're looking for is 'chutzpah'. [wikipedia.org]

      Politicians will feign helplessness (look at the issues they're able to reach consensus on, and those they're not). If a bill to change it ever came up, poison pills would be attached to it. A few academics will claim this sort of thing is an inexorable force of nature, and the farce will continue.

  • by Beeftopia ( 1846720 ) on Monday November 23, 2015 @09:58PM (#50990755)

    Gotta understand the decision-making process for politicians:

    1) These companies are big donors.

    2) 90% percent of the population has no idea about this [bloombergview.com], and fewer care.

    3) Politicians get cash for looking the other way, and it has no impact on their electability. [opensecrets.org]

    I started following these kinds of shenanigans prior to the financial crisis. The blame is on the politicians - not for being self interested, but for actually undermining the society for cash and favors from big donors. The vast majority of the voting public doesn't understand this kind of inside baseball. And the incumbency rate hasn't really changed much as a result of these issues. So the boiling of the frog (this society) will continue until we become Brazil or we snap out of the torpor.

    "A society cannot be both ignorant and free." -- Lady Gaga

    • "A society cannot be both ignorant and free." -- Lady Gaga

      What?

    • Gotta understand the decision-making process for politicians:

      What "decisions" by politicians do you think were involved in this? It's always been legal in the West for people to move their businesses to other countries if they thought they got a better deal. Politicians didn't need to be bribed to enable this.

      Many of them are still smart enough to know that trying to intervene would be a really bad idea. Some even realize that the proper response is to lower tax rates in the US, to match the lower tax rates

      • Politicians write these rules - they are legislators. Here is a a history of the tax inversion. [bloombergview.com]

        "About 51 U.S. companies have reincorporated in low-tax countries since 1982, including 20 since 2012. A lot of drug companies are doing it, and low-tax Ireland is a popular corporate home. They’re doing it despite a 2004 law that legislators had promised would end the practice, despite rule-tightening by the Obama administration to limit it, and despite two decades of efforts by the Internal Revenue Servic

        • Politicians write these rules - they are legislators.

          What rules? You just confirmed that there never have been rules restricting these kinds of deals. You merely want them to write such rules in the future, on your (mistaken) belief that somehow they help the US.

          If you raise the operating costs of US companies through taxation or regulation, they are going to become uncompetitive. The only option they have is to leave for places where they can be competitive again. If you prevent them from leaving, they'll

    • by Kohath ( 38547 )

      In this case, "these kinds of shenanigans" that have the politicians "looking the other way" are entirely within the rules. The companies are following the rules.

  • We can fix this problem and get patent reform at the same time.

    After 3 years, patents issued to foreign based or owned companies can't be enforced against US owned companies making products in the US that utilize them. Patents issued to American owned companies using the patent to make a product in the US can enforce them for the normal time against anyone.

    This solves the problem with obnoxious multi-nationals hoarding patents by making them only useful for a very short time. It discourages US companies f

  • I'm all for a reasonable tax on corporations, but not by offloading their tax burden onto the rest of us. I'm in the 25% bracket and make no where NEAR what a corporation does. Perhaps as an incentive, allow business to claim a tax deduction for money they put back into the business ? Might even get the big ISP types to upgrade their networks :|
  • yes, revise the U.S. tax code - like politicians will ever do that ...

    a less knee jerk/punish big corporations perspective in the WSJ [wsj.com]:

    The companies expect to achieve $2 billion in cost savings as well as significant tax benefits from the deal, under which Pfizer’s tax base would shift to Allergan’s home base in Ireland in a so-called inversion. As a result of the move, Pfizer expects to cut its tax rate to 17% or 18%, from its roughly 25% rate currently, because corporate taxes in Ireland are l

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