Pfizer and Allergan just announced their plans for a $US160 billion mega-merger.
The merger allows Pfizer to relocate its headquarters to Ireland, where Allergan is incorporated and the tax rate for corporations is 12.5% — much less than the US corporate tax rate of 39.2%.
It’s a move called a “tax inversion,” and it’s been very popular move by drug companies who don’t want their global businesses to be taxed at high US rates.
Pfizer CEO Ian Read has made no secret of his desire to lower Pfizer’s tax bill. In an interview with The Wall Street Journal‘s Viewpoints series last month he said high taxes are holding Pfizer back in the race to develop new drugs with research and development.
“I think I have a duty to move to increase or defend the value of the company for the shareholders,” Read told Viewpoints. “I feel we’re at a tremendous disadvantage in that race.”
Again on Monday during a call announcing the merger, Read said the company had “assessed the legal, regulatory, and political landscape,” and had decided that this inversion was the best call.
But not everyone is pleased with the plan. US Sen. Bernie Sanders (I-VT) condemned the move in a statement Monday.
“The Pfizer-Allergan merger would be a disaster for American consumers who already pay the highest prices in the world for prescription drugs,” Sanders said. “It also would allow another major American corporation to hide its profits overseas.”
Sanders added that the current government administration could put a block on the deal. “The Obama administration has the authority to stop this merger, and it should exercise that authority. Congress also must pass real tax reform that demands that profitable corporations pay their fair share of taxes.”
Sanders’ comment comes after last week’s Treasury Department rules that address these tax inversions.
Pfizer and Allergan hope to finalise the deal in the second half of 2016.
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