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There is an entire class of hedge fund who make their money by only investing in the stock of companies who are merging. This is called merger arb and this dea

There is an entire class of hedge fund who make their money by only investing in the stock of companies who are merging. This is called merger arb and this deal is a huge one. Unfortunately it is about as uncertain as a deal can be due to concerns about the government not allow the merger. For those of you who don't follow corporate mergers, there has been a trend recently of larger american based corporations doing mergers with smaller foreign companies to move their head quarters to another country where the corporate tax rate is lower, these are know as tax inversions. Burger King famously recently merged with Canadian "icon?" Tim Hortons in an attempt to domicile the corporation in Canada to lower their tax rate. This is only going to intensify and its corporations telling America that their corporate tax rates are too high. The US has a tax rule specific to itself where by it taxes corps at 35% on profit no matter which country it was earned it. It does let companies deduct taxes paid to foreign governments but it leads to companies operating in a way to minimize their US taxes. From the article linked at the bottom[0]: > Pfizer takes in about 40 percent of its revenue from sales in the United States and 60 percent from foreign sales. Yet, according to its 2014 annual report, Pfizer had about $17 billion in pretax income from overseas, and almost a $5 billion pretax loss here in the United States. By shifting profits overseas, Pfizer pays relatively low cash taxes compared with the nominal United States tax rate of 35 percent. Instead, much of its American tax liability is illusory, taking the form of an obligation to pay taxes in the future if it repatriates cash to the United States. This leads to companies jumping through hoops to shift earnings income around and to holding large chunks of cash off shore of the US. This might be upsetting to some people who think corporations don't pay enough taxes but it's not going to go away. The world isn't going to get more protectionist, especially on the heals of TPP. The US needs to deal with this. [0]http://www.nytimes.com/2015/11/25/business/dealbook/why-pfizers-deal-may-change-the-system-oftaxing-multinationals.html?_r=0 http://www.nytimes.com/2015/11/25/business/dealbook/why-pfiz...

pnut 11y ago
I can't argue with their rationale or yours, but would be totally comfortable with Pfizer being barred from lobbying now, as a foreign corporation, plus being hit with import tariffs. No reason US law has to open taxpayers to blatant exploitation by multinational corporations, who probably benefit more than anyone, from the US' unique combination of highly educated workforce, stable and for-sale political system, protective military, and millions upon millions of the most prolific, indiscriminate consumers in the world.
- tajen 11y ago
  No reason the TPP has to open our taxpayers to blatant exploitation by US corporations who profit from US's protective military. - The rest of the world.
- charlesdm 11y ago
  Taxpayers aren't being exploited. The US just has a ridiculous tax policy, as the only western country in the world. How does it make sense to want to tax every single dollar, regardless of where it was earned? It makes total sense to do an inversion if you want to build a global company. Stopping (or at least reducing the amount of) inversions is easy. Just lower the corporate tax rate to an acceptable level. Large companies who are not doing inversion deals are often leaving billions on the table.
  - toomuchtodo 11y ago
    > Stopping (or at least reducing the amount of) inversions is easy. Just lower the corporate tax rate to an acceptable level. So give in to terrorist demands? No. We institute duty on your products or services, we nullify your patents, we prohibit you access to the market. GTFO. What's that? You don't like that? Buck up princess, government exists to protect its citizens, not your corporate profits.
    - charlesdm 11y ago
      The problem lies in the fact that the US is all about free trade. They don't want to do that. You can't have it both ways. Situation one: I'm a US company, expanding abroad. I acquire foreign competitors, and build a global company. I'm taxed on every dollar (profit), since I'm a US (holding) company. Situation two: I'm a European company, expanding abroad. I acquire a US competitor, and build a global company. Since I'm a foreign company with foreign shareholders, the US can't tax my global income (obviously) This means a US company will be at a significant disadvantage to a UK/Swedish/Belgian company competing in the same market, because, even if their results are exactly the same, their after tax income will be significantly less. This also means that a US company bidding for a US competitor will be able to pay less than a foreign company buying up US companies, because they can achieve less/lower (tax) synergies.
kolbe 11y ago
This is the type of thing where I feel absolutely ashamed of how impotent the US is, despite its superpower status. I find it hard to believe that if we had Andrew Jackson as president today, and Ireland and Bermuda were allowing US companies to shield themselves from paying US taxes, that these tax inversions and avoidance schemes wouldn't be quickly and swiftly resolved with extreme prejudice. Ireland alone is costing the US maybe a hundred billion a year. Our relationship with them is not worth that much. Throw sanctions on them. Make Ireland pay taxes to the US. Don't recognize any IP of any Irish company. Threaten them with bombings. Do something. While it is a "problem" that the US has higher corporate tax rates, that's only an actual problem if the US lacks the will or power to enforce those higher tax rates. And the US has the power. And we look like a joke for letting little shit countries give companies back doors to our tax code. It's also a reason why I think a defiant blowhard like Donald Trump could make waves as president. I don't think he'd have any problem dropping his sac to break treaties and crack skulls.
- alainv 11y ago
  Poe's law? Poe's law.
  - kolbe 11y ago
    Nope. I'm just a man with beliefs that most people today would call antiquated.
    - alainv 11y ago
      Ok - can you elaborate why you so clearly favour aggression and blaming Ireland rather than simple domestic legislation and general political will to prevent these companies using other countries as tax havens?
      - Jach 11y ago
        Yeah, threatening them to take the action of banning US incorporation is a bit weird. Even Trump is about fining the company that wants to move to Mexico above the tax savings rather than getting Mexico to halt the deal.
arca_vorago 11y ago
" The world isn't going to get more protectionist, especially on the heals of TPP." Please remember that the TPP hasn't passed yet, and I don't think it should pass, so let's not treat it as a done deal yet. (even though you and I both know it will be a hard battle to win). Also, I think the world should be more protectionist...

pnut 11y ago

I can't argue with their rationale or yours, but would be totally comfortable with Pfizer being barred from lobbying now, as a foreign corporation, plus being hit with import tariffs. No reason US law has to open taxpayers to blatant exploitation by multinational corporations, who probably benefit more than anyone, from the US' unique combination of highly educated workforce, stable and for-sale political system, protective military, and millions upon millions of the most prolific, indiscriminate consumers in the world.

tajen 11y ago
No reason the TPP has to open our taxpayers to blatant exploitation by US corporations who profit from US's protective military. - The rest of the world.
charlesdm 11y ago
Taxpayers aren't being exploited. The US just has a ridiculous tax policy, as the only western country in the world. How does it make sense to want to tax every single dollar, regardless of where it was earned? It makes total sense to do an inversion if you want to build a global company. Stopping (or at least reducing the amount of) inversions is easy. Just lower the corporate tax rate to an acceptable level. Large companies who are not doing inversion deals are often leaving billions on the table.
- toomuchtodo 11y ago
  > Stopping (or at least reducing the amount of) inversions is easy. Just lower the corporate tax rate to an acceptable level. So give in to terrorist demands? No. We institute duty on your products or services, we nullify your patents, we prohibit you access to the market. GTFO. What's that? You don't like that? Buck up princess, government exists to protect its citizens, not your corporate profits.
  - charlesdm 11y ago
    The problem lies in the fact that the US is all about free trade. They don't want to do that. You can't have it both ways. Situation one: I'm a US company, expanding abroad. I acquire foreign competitors, and build a global company. I'm taxed on every dollar (profit), since I'm a US (holding) company. Situation two: I'm a European company, expanding abroad. I acquire a US competitor, and build a global company. Since I'm a foreign company with foreign shareholders, the US can't tax my global income (obviously) This means a US company will be at a significant disadvantage to a UK/Swedish/Belgian company competing in the same market, because, even if their results are exactly the same, their after tax income will be significantly less. This also means that a US company bidding for a US competitor will be able to pay less than a foreign company buying up US companies, because they can achieve less/lower (tax) synergies.

kolbe 11y ago

This is the type of thing where I feel absolutely ashamed of how impotent the US is, despite its superpower status. I find it hard to believe that if we had Andrew Jackson as president today, and Ireland and Bermuda were allowing US companies to shield themselves from paying US taxes, that these tax inversions and avoidance schemes wouldn't be quickly and swiftly resolved with extreme prejudice. Ireland alone is costing the US maybe a hundred billion a year. Our relationship with them is not worth that much. Throw sanctions on them. Make Ireland pay taxes to the US. Don't recognize any IP of any Irish company. Threaten them with bombings. Do something. While it is a "problem" that the US has higher corporate tax rates, that's only an actual problem if the US lacks the will or power to enforce those higher tax rates. And the US has the power. And we look like a joke for letting little shit countries give companies back doors to our tax code. It's also a reason why I think a defiant blowhard like Donald Trump could make waves as president. I don't think he'd have any problem dropping his sac to break treaties and crack skulls.

alainv 11y ago
Poe's law? Poe's law.
- kolbe 11y ago
  Nope. I'm just a man with beliefs that most people today would call antiquated.
  - alainv 11y ago
    Ok - can you elaborate why you so clearly favour aggression and blaming Ireland rather than simple domestic legislation and general political will to prevent these companies using other countries as tax havens?
    - Jach 11y ago
      Yeah, threatening them to take the action of banning US incorporation is a bit weird. Even Trump is about fining the company that wants to move to Mexico above the tax savings rather than getting Mexico to halt the deal.

arca_vorago 11y ago

" The world isn't going to get more protectionist, especially on the heals of TPP." Please remember that the TPP hasn't passed yet, and I don't think it should pass, so let's not treat it as a done deal yet. (even though you and I both know it will be a hard battle to win). Also, I think the world should be more protectionist...