Sorry, Pfizer (not sorry!)
Back in February, we told you about a tax-dodging scheme that is all too common in this day and age: Pfizer, a U.S. pharmaceutical company and one of the world’s largest, wanted to avoid $35 billion in U.S. taxes on about $148 billion in profits the company maintains offshore.
It would do this by merging with fellow drug firm Allergan, which is based in the tax haven of Ireland.
Our friends over at Americans for Tax Fairness were all over this. They issued a report called Pfizer: Price Gouger, Tax Dodger at a Capitol Hill news conference attended by leading Democrats in Congress (and by Voices for Human Needs. We should disclose here that CHN is a proud member of the ATF coalition).
“By dodging taxes while boosting prescription drug prices, Pfizer squeezes American families from two sides at once,” said AFT Executive Director Frank Clemente. “In the company’s biggest insult to America yet, Pfizer’s merger would allow it to go on enjoying all the benefits of being based here – everything from a publicly-educated workforce, to an excellent communications infrastructure, to a reliable patent system – without adequately paying to support them.”
ATF didn’t just issue a report. They – and their 425 national and state endorsing organizations, including CHN — went out and gathered 120,000 signatures and submitted them to the White House, calling for strong executive action to prevent Pfizer from being able to pull off a $35 billion tax dodge. Remember, that’s $35 billion that our country could use to pay for important things like, say, human needs.
And they listened.
On Monday, the U.S. Department of Treasury announced new guidelines that would reduce the benefits and limit the number of companies that use the tax inversion loophole. Experts such as Clemente think this could prevent Pfizer from its tax dodge.
To be fair, the new guidelines are complicated and it is going to take some time to figure out exactly what they mean. But Reuters is reporting that Pfizer’s proposed merger could indeed be a casualty of Treasury’s actions. (Interestingly, in after-market trading Monday, Allergan shares fell 22 percent, but Pfizer’s edged up a bit.)
Pfizer and Allergan said in a statement that they were reviewing Treasury’s actions and won’t speculate on how they might impact the deal until the review is finished, according to Reuters.
But Clemente sees the move as very good news:
“Pfizer cleverly structured its inversion with Allergan so that it would not be considered an inversion, allowing it to receive all the tax breaks that corporate deserters get when they change their legal address to a tax haven,” Clemente said. “Fortunately, it appears that the Treasury Department has issued a rule with respect to serial inverters, such as Allergan, that will wipe out the expected tax breaks Pfizer was counting on. Americans for Tax Fairness estimated those tax breaks on the company’s existing offshore profits to be as much as $35 billion.
“If our analysis is correct, this is a major victory for taxpayers who pay their fair share and who should expect no less from one of America’s biggest and most profitable corporations. It is also a credit to the Treasury Department for closing this so-called ‘hopscotch loan’ loophole for serial inverters. We hope that Treasury goes further in the future and closes this loophole for all companies once and for all.”
Much work and advocacy and organizing is needed if we are to make sure that the wealthiest among us, including huge corporations that make money in part because of America’s infrastructure, pay their fair share.
But the new Treasury rules appear to be an important start. And they are proof positive that your activism, along with coalitions such as ATF, can make a difference.