US politicians slam Pfizer's merger deal as tax dodge
UNITED States politicians condemned Pfizer's deal with Allergan as a tax dodge on Monday, bringing another round of hand-wringing in Washington over the corporate tax code, though any action before 2017 is unlikely.
Democrats heaped the most criticism on the New York-based drug maker, with Hillary Clinton accusing Pfizer of using legal loopholes to avoid its "fair share" of taxes in a deal that she said "will leave US taxpayers holding the bag".
The front-runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details.
"We cannot delay in cracking down on inversions that erode our tax base," said the ex-US secretary of state and former New York senator in a statement.
Republican front-runner Donald Trump, who has called for a corporate tax overhaul, called the deal "disgusting" in a statement, saying "our politicians should be ashamed".
Pfizer is doing the largest inversion deal of all time. In a US$160 billion (S$226 billion) transaction, it plans to move its tax address from the US to Ireland, if only on paper, by buying and merging into Allergan, a smaller, Dublin-based competitor.
The combined company will be called Pfizer and will be run by Pfizer's CEO, with executive management staying in New York and extensive operations across the US, but it will no longer be taxed as a US company.
More than 50 similar deals have been done over three decades by well-known companies such as Medtronic, Fruit of the Loom and Ingersoll-Rand. Congressional researchers have estimated inversions, left unchecked, will cost the US Treasury nearly US$20 billion in the next 10 years.
The White House declined to comment on Pfizer's deal, but a spokesman told reporters that Congress should take action to prevent more such transactions.
The US Treasury Department last week unveiled new rules to clamp down on inversions, its second attempt to do so since a wave of deals peaked in September last year. But the latest rules amounted to tweaks of existing law and will not impede the Pfizer-Allergan transaction, tax experts said.
Senator Bernie Sanders, Mrs Clinton's chief rival for the Democratic nomination, said the deal "would allow another major American corporation to hide its profits overseas".
Perhaps anticipating the deal would draw fire, Pfizer CEO Ian Read sent a letter on Monday to senior senators.
The letter said: "We will maintain our global operational headquarters in New York City. At the time we close the transaction, we will have over 40,000 employees across 25 states... We will be gaining greater access to resources that will enable us to make significant investments in the US."
Pfizer holds about US$74 billion in profits offshore that, thanks to another loophole, it has not brought into the US to avoid paying the taxes due under America's worldwide corporate tax system. As an Irish-domiciled company, it will have less costly access to those funds.