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Published On: Tue, Apr 29th, 2014

Pfizer to save billions in tax savings with move to UK

Pfizer’s $98.7 billion takeover of London-based AstraZeneca Plc on Monday proves there is one big loser: the U.S. Treasury and America’s tax code.

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A company that started 165 years ago on a Brooklyn, N.Y., street corner will save billions in taxes over the next decade because the U.S. income tax is one of the highest in the world and over 50% of the politicians on America demonize corporations regularly; therefore, lowering that rate is not happening in the foreseeable future.

“This is basically an opportunity to go outside the U.S. and still sell in the U.S. and strip the tax base,” said H. David Rosenbloom, an attorney at Caplin & Drysdale in Washington and director of the international tax program at New York University’s school of law. “If we ever had a legislature in the United States, we could do something about this, but I don’t expect to live that long.”

Business Week details how the law works: “U.S. law seeks to stop companies from avoiding income taxes by simply ditching their home residence. Those rules only prevent companies from getting the tax benefit of an overseas merger if their existing shareholders still own 80 percent or more of the company’s stock after the deal.”

Pfizer and other will maneuver to ensure they keep the most of their hard-earned revenue to pay shareholders, executives, the high priced CEO, their employees and…oh yeah, keep the prices as low as possible for consumers.

Pfizer paid a 27.4% effective tax rate last year, compared with 21.3% for AstraZeneca, according to regulatory filings. Every percentage point in tax reduction could add $200 million to Pfizer’s net income, Barclays estimated in a note Monday.

The U.K. offers other perks, Mr. D’Amelio said in a conference call with investors. It provides tax credits for research and development, and it has proposed taxing income generated from patents at an even lower 10%.

The U.S. tax system has frustrated Pfizer Chief Executive Ian Read for a while. “There should be a tax rate that allows us to compete… in the global marketplace,” he told The Wall Street Journal in an interview in March 2011, a few months after he became CEO.

“Compete”….that is all business want to do, so watch Pfizer closely and see if this decision works.

 

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About the Author

- Writer and Co-Founder of The Global Dispatch, Brandon has been covering news, offering commentary for years, beginning professionally in 2003 on Crazed Fanboy before expanding into other blogs and sites. Appearing on several radio shows, Brandon has hosted Dispatch Radio, written his first novel (The Rise of the Templar) and completed the three years Global University program in Ministerial Studies to be a pastor. To Contact Brandon email [email protected] ATTN: BRANDON

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