tax avoidance vs tax evasion

Last week I posted a TdJ on the ‘takeover’ of Pfizer, the US pharmaceutical giant, by Dublin-based Allergan, a move that allows Pfizer to move its company headquarters to Ireland. British economist John Kay (born 1948) has since published a column explaining that the planned merger is legal tax avoidance rather than illegal tax evasion.

Allergan (formerly known as Actavis and before that as Watson) describes itself as pioneering a new model in the drug sector. This model appears to be that of an investment company trading pharmaceuticals businesses.

Dublin-based Allergan is as authentically Irish as an empty bar on a Saturday night; its operational headquarters are in New Jersey.

The planned merger is a tax inversion, a device that enables a US company with accumulated profits overseas to use them more freely without incurring US tax liability.

John Kay, “The fine line between tax evasion and avoidance“, Financial Times, 2 December 2015 (metered paywall).

There is much more in the full column. In a few days it will be possible to download a free, ungated version of the column from Mr Kay’s home page.

 

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