Monday, April 28, 2014

Pfizer's international profits repatriation

A lot of the speculation about Pfizer's attempted takeover of AstraZeneca has to do with US tax policy. Here's Derek Lowe on that issue (emphasis mine):
Buying a non-US company would allow Pfizer to avoid repatriating a large amount of money (nearly $70 billion) from its foreign operations and exposing it to US taxes. Of course, if Pfizer wanted a substantial operation in the UK to put money into, they might have thought about not closing their large site in Sandwich back in 2011, but hey, that was all of three years ago, and who remembers such things? And not being an accountant, I can't tell you if they'd have been able to do that without running the cash past the US jurisdiction, anyway.
I think everyone agrees that if Pfizer were to purchase AZ, their scientists' jobs would be not long for this world. I don't think anyone believes that Pfizer is just going to bite the tax bullet and bring those funds home; rational economic actors must be rational and tax avoidance Must Be Done.

This is a very weird unintended consequence of American tax policy. (Gimme a tax break or the scientist gets it!) I don't know what should be done about it.

(Doesn't ACS advocate for the removal of these penalties? I forget. Yes, that's right, ACS supports removing repatriation penalties. It's a good thing they know which side of the bread their butter is on.)

4 comments:

  1. So this is weird, isn't it? As an American company, shouldn't the US government actually incentivize Pfizer to bring those tax dollars home and invest them in research. Government tax laws are almost as weird as Big Pharma decisions.

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  2. Then the money to support the infrastructure Pfizer needs to run its business (and, implicitly, the market that Pfizer and other companies who want lower tax burdens count on to generate their incomes) has to come from somewhere, right? If it doesn't come from corporate taxes (or is given out to businesses who threaten to leave if they don't get their way), then it either comes from somewhere else (*cough*individual taxes*cough*) or it doesn't get done.

    I am doubtful that playing "I'll lower my taxes for you" on a global scale works for anyone other than businesses. Of course, this is tax law, so it doesn't seem to have to make sense, and is complicated enough that my thumbnail could be wrong.

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  3. The two ways to solve this corporate tax conundrum in a global market:

    a) protectionism
    b) race to the bottom!

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  4. Yep, this situation won't be helped by the current UK government either. They are desperate to show they are adept at 'attracting investment into the UK'. To them, this will be seen as a victory, with the horrors of the Sandwich closure a few years ago long forgotten. They will extract a few weak guarantees of jobs / investment from Pfizer, which will quickly be ignored as they dismantle AZ research here and abroad.

    It's all so depressing and inevitable. The winners are the senior execs and their consultants and bankers. The losers are everyone else. Good luck to those on the ground

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