10 ms·

Pfizer to Terminate $160B Merger with Allergan

132 points by Amorymeltzer 11y ago

matt_wulfeck 11y ago
The rules for inversion are stupid. More laws more rules. More eventual loopholes. The game goes on. Inversions are a symptom of a huge burdensome tax law that large businesses are incenventized to keep because they benefit from all the fine print. The rest of us are left scratching our heads and ultimately paying the bulk of the taxes because we don't hire teams of tax lawyers.
- refurb 11y ago
  More eventual loopholes. Exactly. All this does is send lawyers and accountants back to the drawing board to figure out the next best option. The only winners here are the politicians who can claim they are "tough on big business".
bpodgursky 11y ago
What a victory for rule of law. The Treasury decided it was legal, but they didn't LIKE it, so they decided to make it so burdensome they wouldn't go through with it. Maybe, fix an idiotic corporate income tax so it's not a constant game avoiding it. Companies are going to stop incorporating in the US; the golden goose is going to die sooner or later.
- refurb 11y ago
  It's not the first time something like that has happened (as I'm sure you know). I'm reminded of the National Firearms Act. The gov't wanted to ban fully automatic weapons back when the prohibition shoot outs were common. Instead of just banning them (probably a long-drawn out process), they just slapped a $200 tax on it. The guns at the time only cost ~$50, so it was an effective 400% price increase. The interesting part is they never updated the tax, so you can buy fully automatic weapons now (if made before 1986) and you pay the $200 tax on a weapon that is north of $10,000.
- dublinben 11y ago
  >Companies are going to stop incorporating in the US No they won't. We should still abolish corporate income tax though.
- rtpg 11y ago
  >Companies are going to stop incorporating in the US Yeah probably not. Don't underestimate the regulatory power of the dollar.
sna1l 11y ago
It seems insane that US corporate tax law isn't a bigger issue in this upcoming presidential election cycle. Companies like Google and Apple constantly take advantage of US/EU/wherever tax laws to pay the least amount they have. I don't particularly blame the companies because they are taking advantage of laws that currently exist, but something needs to be done to simplify the tax code to avoid loopholes like this.
bmmayer1 11y ago
The irony is, the US has the highest corporate income tax of anywhere in the world. Maybe if we eliminated corporate income tax (like most economists suggest[1]), foreign companies would be inverting here instead of the other way around. [1]http://www.dailykos.com/story/2014/8/25/1324505/-Eliminate-corporate-tax-seriously http://www.dailykos.com/story/2014/8/25/1324505/-Eliminate-c...
- rblatz 11y ago
  But is that adventageous to us? Inversions are mostly a paperwork related change from what I understand. So it wouldn't add any significant number of jobs, it won't increase tax revenues, and it could possibly increase the burden on our courts.
  - zavi 11y ago
    It will increase tax revenue.
    - tallanvor 11y ago
      How would eliminating corporate income taxes cause tax revenues to increase? Trickle-down economics is quite clearly debunked, even if some people refuse to look at the evidence.
- mdorazio 11y ago
  As rblatz also points out, this argument just doesn't hold water. The only thing stopping companies from investing in the US right now is lack of demand / lack of disposable income. States are handing out massive tax incentives to try and get companies to actually create jobs, investments in R&D and capital expenditures can largely be tax deducted anyway, and yet large companies are still overwhelmingly choosing to downsize, offshore, and hoard cash on their balance sheets instead. If they could easily make more money by investing, they would, tax rates be damned. 66% of a new dollar earned is infinitely more than not earning that dollar at all. On top of that, what do we get in exchange for foregoing all corporate tax income that we currently receive? I have yet to see a compelling argument showing how this won't just be another trickle-down economics ploy that actually accelerates wealth inequality. Yes, I know the proposal is to kill corporate taxes and also increase capital gains taxes, but how is that better than just leveling the playing field so that all US corporations are taxed equally? I'm genuinely curious if there's a strong economic argument here beyond "everyone else does it this way".
partiallypro 11y ago
Lower the corporate tax to 0%, cut all corporate indirect tax subsidies, raise the top income brackets to offset the loss. Just doing this would be a big boon for the U.S., imo. At the very least, make the U.S. corporate tax structure actually competitive. We have the highest rate in the world, of course people are going to let their money sit off shore.
- refurb 11y ago
  raise the top income brackets to offset the loss. The only way that would work is if the "top income brackets" started at $75,000 per year.
- vinay427 11y ago
  Also, can we please stop taxing the incomes over the exempted amount for US citizens living overseas? I would love to have the option to live elsewhere for some time without my citizenship hanging over me as a burden.
  - kilroy123 11y ago
    As an American living abroad now, I agree!
  - eli_gottlieb 11y ago
    Can we please revoke the US citizenship, then, of people who move to Singapore just to avoid paying American income taxes? Or at least strip them of their assets when they try to give up citizenship as a tax ploy?
    - vinay427 11y ago
      Seriously? If they move to Singapore why should they ethically be liable for US taxes anyway? It's not like the US provides exemeplary services to non-residents that are superior every other developed country (which all do not tax their non-resident citizens). For instance, they didn't even opt to evacuate most citizens out of Yemen and requested help from India to do so. So no, I don't support paying taxes for services I don't receive. If I had to make an analogy, it would be like a remote worker being charged for a catered luncheon that he/she clearly can't attend, and when asked about being exempt like every other remote worker, being told that he/she became a remote worker solely to avoid the lunch payment and so should not be exempt.
randcraw 11y ago
If you believe giant US companies should pay lower taxes, I have some bad news. That'll be hard, because they already pay little or no US taxes now. How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7%. These taxes don't sound like much of a burden to me. Like most Fortune 100 firms, through legal maneuvering, Pfizer has been offshoring profits for years in order to avoid paying US taxes. At present, that has now added up to over $148B in offshored tax-free profit. Apple and most other giant US corps are little different. None are exactly being taxed into oblivion. In fact, all these firms could repatriate those monies at tax rates substantially lower than the nominal (high) tax rate. But that fact is conveniently overlooked when US corp. tax rates are publicly bemoaned. For example, I've heard there's a substantial tax savings when investing in US R&D. What's wrong with that option when repatriating profit while lowering taxes? And the sundry other imaginative ways available within existing US tax law, if CFOs weren't so damned intransigent about paying the obligatory dues of doing business in America? In the end, you can't pretend corporations like Pfizer are aggrieved innocents in the current legal stalemate of unrepatriated profits that US corporations so volubly bemoan. They knew the deal when they launched their business in this country. It's way too late to insist on changing the rules now. http://www.cnbc.com/2016/02/26/report-pfizer-dodging-35b-in-taxes.html http://www.cnbc.com/2016/02/26/report-pfizer-dodging-35b-in-... http://www.businessinsider.com/how-much-money-apple-avoids-paying-in-taxes-2014-6 http://www.businessinsider.com/how-much-money-apple-avoids-p... http://billmoyers.com/2014/05/29/10-companies-that-dodge-corporate-taxes/ http://billmoyers.com/2014/05/29/10-companies-that-dodge-cor...
- Shivetya 11y ago
  Regardless of what they put back into the treasury the idea that they pay any tax is absurd. They collect taxes for the treasury and this is passed on in the cost of every sale and service they make. About the only method to force payment of a tax on a sale or service is sadly through something similar to a VAT. Then remove any income tax paid. Still a better solution would be a low, 15% or such, flat tax which has no deductions
- coliveira 11y ago
  Also, there is a lot of people who think that companies would like to change tax laws. Here is another surprise for you: they don't. If the tax laws were a problem for them, they would have changed them already -- after all, solving big corporation problems is all that congress members do. The thing is that big companies want people to think that they pay a lot of taxes when in fact they already know how to legally evade pretty much every tax you can imagine.
RA_Fisher 11y ago
Corporate taxation is double taxation because personal income (and capital gains) are taxed. The problem with double taxation is that splits and hides the amount of tax. It's an anti-pattern that creates complexity and deadweight losses like tax accounting, etc. that could be used for productive purposes.
known 11y ago
Govt will do nothing http://www.huffingtonpost.com/entry/panama-trade-deal_n_922398.html http://www.huffingtonpost.com/entry/panama-trade-deal_n_9223...
randomname2 11y ago
Not good for some hedge funds: "80 hedge funds counted Allergan as one of their top 10 holdings at the end of the fourth quarter" http://reut.rs/1N8fNTF http://reut.rs/1N8fNTF Not good for senior execs either of course, nor for the advising banks due to lose out on $100 million of fees (Goldman, Guggenheim, Centerview, Moelis & Company), and JPMorgan and Morgan Stanley lose out on dozens of millions of investment banking fees. Maybe good for some of the workers, who won't lose their job to "synergies" anymore?

132 points by Amorymeltzer 11y ago

The rules for inversion are stupid. More laws more rules. More eventual loopholes. The game goes on. Inversions are a symptom of a huge burdensome tax law that large businesses are incenventized to keep because they benefit from all the fine print. The rest of us are left scratching our heads and ultimately paying the bulk of the taxes because we don't hire teams of tax lawyers.

refurb 11y ago
More eventual loopholes. Exactly. All this does is send lawyers and accountants back to the drawing board to figure out the next best option. The only winners here are the politicians who can claim they are "tough on big business".

bpodgursky 11y ago

What a victory for rule of law. The Treasury decided it was legal, but they didn't LIKE it, so they decided to make it so burdensome they wouldn't go through with it. Maybe, fix an idiotic corporate income tax so it's not a constant game avoiding it. Companies are going to stop incorporating in the US; the golden goose is going to die sooner or later.

refurb 11y ago
It's not the first time something like that has happened (as I'm sure you know). I'm reminded of the National Firearms Act. The gov't wanted to ban fully automatic weapons back when the prohibition shoot outs were common. Instead of just banning them (probably a long-drawn out process), they just slapped a $200 tax on it. The guns at the time only cost ~$50, so it was an effective 400% price increase. The interesting part is they never updated the tax, so you can buy fully automatic weapons now (if made before 1986) and you pay the $200 tax on a weapon that is north of $10,000.
dublinben 11y ago
>Companies are going to stop incorporating in the US No they won't. We should still abolish corporate income tax though.
rtpg 11y ago
>Companies are going to stop incorporating in the US Yeah probably not. Don't underestimate the regulatory power of the dollar.

sna1l 11y ago

It seems insane that US corporate tax law isn't a bigger issue in this upcoming presidential election cycle. Companies like Google and Apple constantly take advantage of US/EU/wherever tax laws to pay the least amount they have. I don't particularly blame the companies because they are taking advantage of laws that currently exist, but something needs to be done to simplify the tax code to avoid loopholes like this.

bmmayer1 11y ago

The irony is, the US has the highest corporate income tax of anywhere in the world. Maybe if we eliminated corporate income tax (like most economists suggest[1]), foreign companies would be inverting here instead of the other way around. [1]http://www.dailykos.com/story/2014/8/25/1324505/-Eliminate-corporate-tax-seriously http://www.dailykos.com/story/2014/8/25/1324505/-Eliminate-c...

rblatz 11y ago
But is that adventageous to us? Inversions are mostly a paperwork related change from what I understand. So it wouldn't add any significant number of jobs, it won't increase tax revenues, and it could possibly increase the burden on our courts.
- zavi 11y ago
  It will increase tax revenue.
  - tallanvor 11y ago
    How would eliminating corporate income taxes cause tax revenues to increase? Trickle-down economics is quite clearly debunked, even if some people refuse to look at the evidence.
mdorazio 11y ago
As rblatz also points out, this argument just doesn't hold water. The only thing stopping companies from investing in the US right now is lack of demand / lack of disposable income. States are handing out massive tax incentives to try and get companies to actually create jobs, investments in R&D and capital expenditures can largely be tax deducted anyway, and yet large companies are still overwhelmingly choosing to downsize, offshore, and hoard cash on their balance sheets instead. If they could easily make more money by investing, they would, tax rates be damned. 66% of a new dollar earned is infinitely more than not earning that dollar at all. On top of that, what do we get in exchange for foregoing all corporate tax income that we currently receive? I have yet to see a compelling argument showing how this won't just be another trickle-down economics ploy that actually accelerates wealth inequality. Yes, I know the proposal is to kill corporate taxes and also increase capital gains taxes, but how is that better than just leveling the playing field so that all US corporations are taxed equally? I'm genuinely curious if there's a strong economic argument here beyond "everyone else does it this way".

partiallypro 11y ago

Lower the corporate tax to 0%, cut all corporate indirect tax subsidies, raise the top income brackets to offset the loss. Just doing this would be a big boon for the U.S., imo. At the very least, make the U.S. corporate tax structure actually competitive. We have the highest rate in the world, of course people are going to let their money sit off shore.

refurb 11y ago
raise the top income brackets to offset the loss. The only way that would work is if the "top income brackets" started at $75,000 per year.
vinay427 11y ago
Also, can we please stop taxing the incomes over the exempted amount for US citizens living overseas? I would love to have the option to live elsewhere for some time without my citizenship hanging over me as a burden.
- kilroy123 11y ago
  As an American living abroad now, I agree!
- eli_gottlieb 11y ago
  Can we please revoke the US citizenship, then, of people who move to Singapore just to avoid paying American income taxes? Or at least strip them of their assets when they try to give up citizenship as a tax ploy?
  - vinay427 11y ago
    Seriously? If they move to Singapore why should they ethically be liable for US taxes anyway? It's not like the US provides exemeplary services to non-residents that are superior every other developed country (which all do not tax their non-resident citizens). For instance, they didn't even opt to evacuate most citizens out of Yemen and requested help from India to do so. So no, I don't support paying taxes for services I don't receive. If I had to make an analogy, it would be like a remote worker being charged for a catered luncheon that he/she clearly can't attend, and when asked about being exempt like every other remote worker, being told that he/she became a remote worker solely to avoid the lunch payment and so should not be exempt.

randcraw 11y ago

If you believe giant US companies should pay lower taxes, I have some bad news. That'll be hard, because they already pay little or no US taxes now. How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7%. These taxes don't sound like much of a burden to me. Like most Fortune 100 firms, through legal maneuvering, Pfizer has been offshoring profits for years in order to avoid paying US taxes. At present, that has now added up to over $148B in offshored tax-free profit. Apple and most other giant US corps are little different. None are exactly being taxed into oblivion. In fact, all these firms could repatriate those monies at tax rates substantially lower than the nominal (high) tax rate. But that fact is conveniently overlooked when US corp. tax rates are publicly bemoaned. For example, I've heard there's a substantial tax savings when investing in US R&D. What's wrong with that option when repatriating profit while lowering taxes? And the sundry other imaginative ways available within existing US tax law, if CFOs weren't so damned intransigent about paying the obligatory dues of doing business in America? In the end, you can't pretend corporations like Pfizer are aggrieved innocents in the current legal stalemate of unrepatriated profits that US corporations so volubly bemoan. They knew the deal when they launched their business in this country. It's way too late to insist on changing the rules now. http://www.cnbc.com/2016/02/26/report-pfizer-dodging-35b-in-taxes.html http://www.cnbc.com/2016/02/26/report-pfizer-dodging-35b-in-... http://www.businessinsider.com/how-much-money-apple-avoids-paying-in-taxes-2014-6 http://www.businessinsider.com/how-much-money-apple-avoids-p... http://billmoyers.com/2014/05/29/10-companies-that-dodge-corporate-taxes/ http://billmoyers.com/2014/05/29/10-companies-that-dodge-cor...

Shivetya 11y ago
Regardless of what they put back into the treasury the idea that they pay any tax is absurd. They collect taxes for the treasury and this is passed on in the cost of every sale and service they make. About the only method to force payment of a tax on a sale or service is sadly through something similar to a VAT. Then remove any income tax paid. Still a better solution would be a low, 15% or such, flat tax which has no deductions
coliveira 11y ago
Also, there is a lot of people who think that companies would like to change tax laws. Here is another surprise for you: they don't. If the tax laws were a problem for them, they would have changed them already -- after all, solving big corporation problems is all that congress members do. The thing is that big companies want people to think that they pay a lot of taxes when in fact they already know how to legally evade pretty much every tax you can imagine.

RA_Fisher 11y ago

Corporate taxation is double taxation because personal income (and capital gains) are taxed. The problem with double taxation is that splits and hides the amount of tax. It's an anti-pattern that creates complexity and deadweight losses like tax accounting, etc. that could be used for productive purposes.

known 11y ago

Govt will do nothing http://www.huffingtonpost.com/entry/panama-trade-deal_n_922398.html http://www.huffingtonpost.com/entry/panama-trade-deal_n_9223...

randomname2 11y ago

Not good for some hedge funds: "80 hedge funds counted Allergan as one of their top 10 holdings at the end of the fourth quarter" http://reut.rs/1N8fNTF http://reut.rs/1N8fNTF Not good for senior execs either of course, nor for the advising banks due to lose out on $100 million of fees (Goldman, Guggenheim, Centerview, Moelis & Company), and JPMorgan and Morgan Stanley lose out on dozens of millions of investment banking fees. Maybe good for some of the workers, who won't lose their job to "synergies" anymore?