tax avoidance by Pfizer

Why did Pfizer, the huge US pharmaceutical company, merge with Allergan, a company registered in Ireland? The answer is simple. The merged company, now domiciled in low-tax Ireland, becomes more profitable at the expense of US taxpayers. There is no other reason for the two companies to merge.

At the request of a loyal TdJ reader, here is information that I gleaned from an editorial published yesterday in the Financial Times. Why do companies do such things? Because they can get away with it. Why do they get away with it? Good question. I suspect it is because they have a lot of money, and politicians need money to finance their expensive campaigns for election.

America’s pharmaceutical companies sometimes seem to be on a one-sector mission to alienate the entire US public. After a summer during which groups such as Gilead and Valeant regularly hit the headlines for charging eye-poppingly high drug prices, attention has now turned to the neuralgic practice of tax avoidance.

It follows the announcement this week by Pfizer of a $160bn merger with Allergan, an Irish-registered pharmaceuticals company. The deal, while vast in scale, has but limited industrial logic. Its principal purpose is to allow the US giant to cut its tax bill by re-domiciling overseas.

So-called “inversions” have long been a dirty word in the US. …. Drug companies are among the biggest practitioners of inversions. ….

Drug companies’ enthusiasm for tax arbitrage sits uncomfortably with the sector’s dependence on official support. This goes beyond the US legal framework and the protection it offers for intellectual property. Pharma companies benefit from taxpayer-funded research through such bodies as the National Institutes of Health and the National Science Foundation. Drugs purchases worth billions of dollars each year are funnelled through federally funded buyers such as Medicare and Medicaid.

Obama should close Pfizer’s tax loophole“, Financial Times editorial, 25 November 2015 (metered paywall).


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