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 Democrats heaped the most criticism on the New York-based drug
maker, with Hillary Clinton accusing Pfizer of using legal loopholes
to avoid its "fair share" of taxes in a deal that she said "will
leave U.S. taxpayers holding the bag."
The front-runner for the Democratic presidential nomination in the
November 2016 election said she will propose steps to prevent more
inversions, but she did not provide details. "We cannot delay in
cracking down on inversions that erode our tax base," said the ex-U.S.
secretary of state and former New York senator in a statement.
Republican front-runner Donald Trump, who has called for a corporate
tax overhaul, called the deal "disgusting" in a statement, saying
"our politicians should be ashamed."
Pfizer is doing the largest inversion deal of all time. In a
$160-billion transaction, it plans to move its tax address from the
United States to Ireland, if only on paper, by buying and merging
into Allergan, a smaller, Dublin-based competitor.
The combined company will be called Pfizer and will be run by
Pfizer's CEO, with executive management staying in New York and
extensive operations across the United States, but it will no longer
be taxed as a U.S. company.
More than 50 similar deals have been done over three decades by
well-known companies such as Medtronic Plc, Fruit of the Loom and
Ingersoll-Rand Plc. Congressional researchers have estimated
inversions, left unchecked, will cost the U.S. Treasury nearly $20
billion in the next 10 years.
The White House declined to comment on Pfizer's deal, but a
spokesman told reporters in a briefing that Congress should take
action to prevent more such transactions.
The U.S. Treasury Department last week unveiled new rules to clamp
down on inversions, its second attempt to do so since a wave of
deals peaked in September 2014. But the latest rules amounted to
tweaks of existing law and will not impede the Pfizer-Allergan
transaction, tax experts said.
Senator Bernie Sanders, Clinton's chief rival for the Democratic
nomination, said the deal "would allow another major American
corporation to hide its profits overseas."
Perhaps anticipating the deal would draw fire, Pfizer CEO Ian Read
sent a letter on Monday to senior senators.
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The letter said, "We will maintain our global operational
headquarters in New York City. At the time we close the transaction,
we will have over 40,000 employees across 25 states ... We will be
gaining greater access to resources that will enable us to make
significant investments in the U.S."
TAPING OFFSHORE ABROAD
Pfizer holds about $74 billion in profits offshore that, thanks to
another loophole, it has not brought into the United States to avoid
paying the taxes due under America's worldwide corporate tax system.
As an Irish-domiciled company, it will have less costly access to
those funds.
Representative Tom Price, one of few congressional Republicans to
comment on Monday, said in a statement that more Treasury
regulations will not solve the inversions problem. "The only real
solution to curbing inversions is tax reform," he said.
But Congress, divided over fiscal issues, is widely seen as unlikely
to tackle a tax overhaul before the 2016 elections.
“Pfizer built their business on the back of our research and
development tax incentives, our federally supported medical
research, our skilled workforce, and our infrastructure," said
Democratic Representative Rosa DeLauro in a statement.
"We cannot continue to allow Pfizer and other corporations to
pretend that they are American while reaping the benefits this
country has to offer, yet claiming to be another nationality when
the tax bill comes," she said.
(Additional reporting by Roberta Rampton, Julia Edwards and Doina
Chiacu; Editing by Christian Plumb and Lisa Shumaker)
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