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THE US TREASURY Department announced a new package of rules yesterday aimed at making “tax inversions” — when U.S. companies move abroad for lower tax rates — less financially appealing.
The new regulations, the third round that the Treasury has put forward on inversions, seek to limit internal corporate borrowing that shifts profits out of the United States.
Tax inversions have sparked a political outcry. Last November, drug companies Pfizer and Allergan announced a $160 billion merger deal that could save New York-based Pfizer hundreds of millions of dollars in U.S. taxes annually by moving its headquarters for tax purposes to Ireland, where Allergan is based.
The new rules announced by the US could undermine this deal, however.
Late last night, Pfizer and Allergan issued a joint statement saying that they are reviewing the new Treasury rules and would not speculate on their potential impact.
Investors, however, appeared to think the rules could have a negative impact, and sent Allergan’s shares down nearly 22% in after-hours trading. Pfizer’s shares rose about 2 percent.
Treasury Secretary Jacob Lew said Treasury’s new rules are designed to make inversions less economically beneficial for companies. But he again called on Congress to act to halt the practice.
“Only new anti-inversion legislation can stop these transactions,” Lew said on a conference call with reporters.
Until that time, creative accountants and lawyers will continue to seek new ways for companies to move their tax residences overseas and avoid paying taxes here at home.
“Strong legislation”
Several Democrats have announced bills to make it harder for U.S. corporations to invert and President Barack Obama has included proposals in a package of measures to reform corporate taxes.
But prospects for passing such legislation in an election year are not deemed high, given the wide differences between Democrats and Republicans on taxes.
In a statement, Democratic senator Charles Schumer, New York, praised Treasury’s new set of proposals. But he said “the only way to slam the door on inversions for good is to pass tough, strong legislation and reform our tax laws.”
Lew said the new Treasury proposals would also take aim at foreign companies that acquire multiple U.S. firms over a short period of time.
He said that these transactions were being done by what he called “serial inverters” in an effort to keep slashing their U.S. tax liabilities.
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Wait, you mean Pfizer aren’t here for our incredibly skilled workforce??
As a Multinational corp employee I would disagree. There are many reasons they and other multinationals setup, tax being one factor. But you need to create the right environment for business and this includes a number of key attributes such as financial, people, infrastructure, culture etc. Once you create critical mass for any industry such as Pharma, tech, financial services etc you attract more investment and also allow for home grown business to thrive either in support of the sectors or part of the sectors. Everyone focuses on the tax the corporations should pay but seem to ignore all the benefits they bring to the broader economy such as job, GDP, reputation etc. Anyways you have to ask what are the real drivers behind the US Treasury ruling and longer term impact to US economy will be felt. Ireland should continue to create attractive business environment to capitalize on this.
That’s great, Lawrence. We should then let them do whatever they like, in grateful appreciation for some employment. Would they be interested in any of our maidens or small boys??
Yeah that really brings perspective to conversation. We let the banks do what they want to the country but God forbid you try and bring jobs or real investment. Pfizer has invested 7 Billon in Ireland. Yeah real vultures. And have they broken any rules or laws. No. Unlike the banks for example
Oh Oh!
Wait a couple of days, and the “Tax Advisers” will find loopholes in that one too.
Government should be concentrating on Irish businesses, not depending on corporations,like the housing bubble, it will burst.deloitte reported 1,500 Irish businesses closed in 2015,Richard Burton is not on TV talking about that.
True that. Last time I saw Richard Burton on the box he was taming a shrew.
A tax harmonisation across the EU is what’s really scary.
Tax is the governments way of control. They dont like the free market economy dictating terms.
I’m sorry, Lawrence, but you really are a fool – and by the looks of things, would sell your own granny for your jobs and perks. The “free market” has been such a great friend to everybody, has it?
There is a big difference between a true Free market economy (which doesnt exist anymore) and the monopolized version of capitalism driving the bank bail outs for example. I have no shame in what i do and i am being very open and honest about it, i work hard and pay my taxes so owe nothing to you sir.
We have propped up our economy on another bubble that is about to burst, but this time its based on our corporation tax laws rather than housing. It’ll be the average people again that will have to pick up the pieces.
I wonder how will that work with the TTIP or maybe its a result of the TTIP.
HUNDREDS OF MILLIONS!?! “The move would save Pfizer some $35 billion in taxes and be the largest corporate inversion ever.” -RT
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