American Companies moving Jobs Overseas
MONEYBOX A BLOG ABOUT BUSINESS AND ECONOMICS.
NOV. 23 2015 12:36 PM
Once Again, Pfizer Is Trying to Move Overseas to Avoid U.S. Taxes By Jordan Weissmann
Money, money, money, money Pfi-zer. Photo by Spencer Platt/Getty Images
It's been a long, hard road, but it seems as if Pfizer Inc. might finally succeed at self- deporting itself in order to escape the IRS. The U.S. pharmaceutical giant announced Monday that it plans to merge with Ireland-based Allergan in a $155 billion deal that would set up the largest "corporate inversion" in history while also creating the world's biggest drugmaker by sales.
Jordan Weissmann is Slate’s senior busine ss and e c onomic s c orre spondent .
Inversions, you may recall, are transactions that allow U.S. companies to move their headquarters overseas by merging with a smaller foreign company, and thereby avoid U.S. corporate income taxes. For their part, Pfizer and Allergan plan to shack up together in Dublin, where the newlywed couple will be renamed Pfizer PLC and continue trading on the New York Stock Exchange while paying a projected tax rate of about 17 or 18 percent, down from Pfizer's current 25 percent tax bill. This is Pfizer's second high-profile attempt to move abroad. Last year, it tried and failed to purchase U.K-.based AstraZeneca, whose management resisted the deal, arguing it undervalued their company.
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While any sort of business can theoretically use an inversion to reduce its tax burden —Burger King arranged a tie-up with Tim Hortons as an excuse to move to Canada last year—the pharmaceutical industry has been especially keen on this maneuver. There seem to be a few reasons why. America's corporate tax code is unusual in that it taxes profits earned abroad, which makes it especially irksome for drugmakers, which sell their products all across the globe. There are also lots of pharma companies based in Europe, which means there are plenty of merger targets for American firms considering an inversion. Beyond that, there's a follow-the-leader effect at play— pharma companies that don't invert are worried that paying higher U.S. taxes will put them at a competitive disadvantage against those who do manage to move overseas.
JORDAN WEISSMANN
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These deals are obviously a sign that some companies find the U.S. tax system inhospitable. Conservatives have typically cited them as proof that the entire corporate code needs an overhaul—one that, in all likelihood, would involve lowering rates to make ours a bit more competitive with the rest of the world's. But, frankly, it might not be worth getting too worked up over inversions, since at this point they're still fairly rare, and it's not 100 percent clear how they affect our economy.
Keep in mind that when they invert, companies like Pfizer are basically moving their official postal address and not a ton more; it's not as if Pfizer is uprooting all of its factories and R&D and moving them to Dublin, too. As Matt Gardner, executive director of the Institute on Taxation and Economic Policy, put it earlier this month, “An inversion by Pfizer would very likely amount to pretending to be Irish, much like the Notre Dame mascot.” The merger will probably deal a slight blow to U.S. gross domestic product, since the profits from inverted companies earn aren't counted toward our national accounts. But that's not exactly crushing, since at least some of the money will probably get sent back to U.S. investors in the form of dividends. As for taxes, well, Congress' number-crunchers think inversions will cost the U.S. Treasury about $41 billion over 10 years. However, some recent research out of Northwestern's Kellogg School of Management suggests that might be off—and that, weirdly enough, inversions might actually increase American tax collections by allowing companies to bring money they were previously hoarding overseas back to their U.S. operations and hand it out to shareholders.
Economic implications aside, Pfizer’s move can still be interpreted as a bit of a middle finger to the Treasury Department, which just last week announced a new set of rules specifically designed to discourage inversions. Sorry Jack Lew. Big pharma, it seems, don’t care.
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POLITICS WHO'S WINNING, WHO'S LOSING, AND WHY.
JUNE 7 2016 1:52 PM
14 Republican Excuses for Donald Trump’s Racism It’s not racism. It’s a matter of tone. It’s just Trump being Trump. And more! By William Saletan
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“That’s what I think is endearing about Donald Trump.” Photo illustration by Natalie Matthews-Ramo. Photo of Reince Priebus by Mark Wilson/Getty Image; Sen. Orrin Hatch by Mark
Wilson/Getty Images; and Rep. Jason Chaffetz by Pete Marovich/Getty Images
Three months ago, David Duke, a white supremacist, declared his support for Donald Trump. Duke—who beat a field of Republicans, and all but one Democrat, in the 1991 race for governor of Louisiana—praised Trump for saying “what I said almost 25 years ago.” When CNN’s Jake Tapper invited Trump to repudiate Duke and the KKK, Trump begged off, saying he needed more information. That prompted a rebuke from House Speaker Paul Ryan. “If a person wants to be the nominee of the Republican Party, there can be no evasion and no games,” Ryan demanded. “They must reject any group or cause that is built on bigotry. This party does not prey on people’s prejudices.”
Will Saletan write s about politic s, sc ienc e, te c hnolog y, and other stuff for Slate. He’s the author of Be ar ing Right.
WILLIAM SALETAN
Slate is published by The Slate Group, a Graham Holdings Company. All contents © 2016 The Slate Group LLC. All rights reserved.
Three months later, Trump has done what Duke did, and more. By tapping popular anger and exploiting fear of Cuban Americans, Mexican Americans, blacks, and Seventh-day Adventists, Trump has beaten a field of Republicans. If he can overcome one last Democratic candidate, he’ll be president of the United States. Rather than turn away from Duke’s politics, Trump has moved closer to them. He has repeatedly accused Gonzalo Curiel, the federal judge who is hearing a fraud case against Trump University, of bias and unfitness because Curiel—who was born in Indiana—is “Mexican.” This weekend, Trump added that a Muslim judge might be similarly incapable of treating him fairly. Meanwhile, Trump repeated his call for a ban on Muslims entering the United States.CONTINUE READING