November 29, 2015 by islandersvoice1
If you need any more proof that unfettered capitalism will go to any extreme to shift its tax burden to the little guy, read the following article about Pfizer’s acquisition of Allergan.
Pfizer Buying Allergan So It Can Pretend To Be Irish In Tax Scam
November 23, 2015
By Dave Johnson, Campaign for America’s Future, http://www.ourfuture.org
The pharmaceutical corporation Pfizer will acquire pharmaceutical corporation Allergan in a deal valued at $160 billion. My colleague Richard Eskow called this combination of Pfizer (the maker of Viagra) and Allergan (the maker of Botox) “a merger of false desire and false beauty.”
More to the point, this deal is structured as an “inversion” designed to dodge U.S. taxes. Allergan (itself the product of a similar inversion) is headquartered in New Jersey but for tax reasons is incorporated in Ireland – a tax haven. After the acquisition, Pfizer will keep its headquarters in New York but change its corporate address to Ireland.
In other words, the resulting merged company will make and sell products in the same places it makes and sells them now. The same executives will occupy the same buildings. It will receive the same taxpayer-funded U.S. services, infrastructure, courts and military protection that it receives now. But the company will now claim it is “based” in tax-haven Ireland and thereby dodge U.S. taxation.
It’s A Tax Dodge
This deal is entirely about dodging billions of tax dollars. The Washington Post Wonkblog explains, in “Pfizer and Allergan to merge in $160 billion inversion“:
Gustav Ando, research director for IHS Life Sciences, a business information and consulting company, said … “This merger isn’t meant to benefit patients; it isn’t meant to innovate in any kind of way. It’s basically a tax inversion strategy, and certainly the benefits won’t be passed on to consumers,” Ando said. “It’s pretty easy at the moment to paint the pharmaceutical industry in a negative light and this certainly doesn’t do anything to help the cause. It definitely increases the reputational risks to the industry.”
A Rigged System
Corporations receive immense benefits from operating in the United States. The United States provides the most well-developed business-enabling environment in the world, a strong customer base, a highly educated workforce, a developed infrastructure, patent and copyright protections, an advanced legal system and courts, police and other protections, military protection, government-funded scientific research, and so much more.
Corporations also get a lot of business from our government. Pfizer got $5.3 billion in federal contracts between 2010 and 2014. And Pfizer makes $1 billion a year from selling drugs to Medicare, Medicaid and other U.S. government programs. About 5 percent of Pfizer’s $20 billion annual U.S. revenue comes from the federal government and taxpayer dollars.
But corporations and shareholders enjoy lower tax rates than regular people do. The people who make a gain from trading corporate shares get a special, lower capital gains tax rate. (This capital gains tax rate is lower because the wealthiest make most of their income from capital gains, and the wealthiest make most of their income from capital gains because the capital gains tax rate is lower.)
And then, on top of that, corporations are able to lobby and otherwise use their immense wealth and power to influence our legal and tax system.
This is another example of how we have a rigged tax system, filled with loopholes and breaks that benefit wealthy CEOs and the 1 percent shareholders at the expense of the rest of us.
Pfizer Also Uses Deferral Loophole – $148 Billion Stashed Offshore
Pfizer reported that it lost an average of $3 billion in the U.S. but made $15 billion each year each year offshore over the last five years. But Pfizer had 40 percent of its sales and 50 percent of its assets in the U.S. in 2014. It looks a lot like Pfizer is engaged in schemes that make it appear as if its profits are really earned in tax havens rather than in the U.S. As a result of this kind of shifting, Pfizer currently has approximately $148 billion in untaxed profits stashed offshore on which it has paid ZERO U.S. income taxes. (See also The New York Times and Los Angeles Times.)
It is highly likely that this inversion will enable Pfizer to dodge ever having to pay the taxes it owes on the approximately $148 billion of taxable profits it has kept out of the country. At the U.S. tax rate of 35 percent, this represents a tax-revenue loss of up to $51.8 billion that other taxpayers will have to make up for. It also provides Pfizer a substantial advantage over other companies that focus on innovation and serving customers instead of engaging in schemes to dodge taxes.
Who, Exactly, Benefits From This Rigged System?
When you hear that some “corporation” is doing something, what does this mean? Who, exactly, is getting the benefits of the things corporations do?
A corporation is really just a contract that enables the low-risk accumulation of investment to fund large-scale projects that would otherwise be difficult to accomplish. Multiple shareholders provide equity to the corporation and in return they have a claim on a share of any resulting profits. Shareholders receive “limited liability,” which means they are not liable for the debts and any other liabilities of the corporation. A corporation can get in a lot of trouble, financial and otherwise, and then just close up shop, divide its assets to its creditors, and the shareholders can just walk away, losing only the money they originally put in.
When you hear about a “corporation,” this is who you are really hearing about:
As of 2010, the top 1 percent owned 35 percent of corporate shares and the next 9 percent owned another 46 percent.
A lot of people see corporations as these anonymous entities with no actual human face. But as Mitt Romney reminded us in the 2012 presidential campaign, “Corporations are people, my friend.”
When you hear that “corporations” are benefiting from a tax break, subsidy, trade deal, rigged contract, whatever, you are really hearing about a few people benefiting. But not the rest of us.
Why Doesn’t Congress Fix This Rigged System?
A tax “loophole” lets Pfizer and other American companies renounce their U.S. citizenship to get out of paying their fair share of taxes. Congress could stop Pfizer from deserting America tomorrow. Legislation now waiting for a vote is stuck because conservatives in Congress will not let it be voted on. The legislation (S. 198 and H.R. 415) is sponsored by Sen. Dick Durbin (D-Ill.) and Rep. Sandy Levin (D-Mich.) and would apply to any direct or indirect inversion. (The Pfizer-Allergan merger is indirect.)
● The legislation would prevent the tax benefits of an inversion if a company has its headquarters in the United States. Pfizer is not moving to Ireland – its CEO, staff and facilities will remain here.
● The legislation requires that if the majority of a company’s shareholders are American, the company should be considered American. Pfizer’s original U.S. shareholders will own 56 percent of the merged company.
● Companies should not be able to desert America by changing their corporate address to a tax haven. Congress should pass this legislation before this deal is consummated by shareholders in coming months to ensure Pfizer pays its fair share of U.S. taxes.
The only reason this tax dodge has not been eliminated is that Republican leadership will not allow a vote to change this. If a vote were allowed there is no question Congress would fix this.
Democratic presidential candidate Hillary Clinton released this statement through her campaign:
“For too long, powerful corporations have exploited loopholes that allow them to hide earnings abroad to lower their taxes. Now Pfizer is trying to reduce its tax bill even further. This proposed merger, and so-called ‘inversions’ by other companies, will leave U.S. taxpayers holding the bag. As President, I will fight to reform our tax system to reward growth, innovation, and job creation here in the United States. We cannot delay in cracking down on inversions that erode our tax base.
“In the weeks ahead, I will propose specific steps to prevent these kind of transactions, which take advantage of loopholes that litter our tax code, distort incentives for investment, and disadvantage small businesses and domestic firms that cannot game the international tax system. I urge Congress to act immediately to make sure the biggest corporations pay their fair share, and regulators also should look hard at stronger actions they can take to stop companies from shifting earnings overseas. Republicans should stop trying to tilt the tax code even further in favor of the super wealthy and the largest corporations and join us in supporting these necessary reforms on behalf of U.S. taxpayers. We should come together to encourage investment and job creation here in the United States, not this kind of damaging gamesmanship.”
Sen. Bernie Sanders issued the following statement today after Pfizer and Allergan announced they would merge in the largest inversion ever:
“The Pfizer-Allergan merger would be a disaster for American consumers who already pay the highest prices in the world for prescription drugs. It also would allow another major American corporation to hide its profits overseas. 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.”
Giant corporations like Pfizer – and apparently the Republican leadership they are paying – know no country, they feel no patriotism, they have no allegiance to their customers or to the United States or its citizens. This is all about money.
Demand that Congress be allowed to vote on S. 198 and H.R. 415 and block this tax-dodging merger.