April 6, 2016
American pharmaceutical giant Pfizer called off a $160 billion merger with Dublin-based Allergan. It is considered as the biggest win of President Obama’s campaign to stop American companies from heading overseas to avoid U.S. taxes.
The abrupt collapse of the deal comes just days after the Treasury Department made a rule change that seemed to be aimed explicitly at the transaction, which stripped it of many of its benefits. This deal would have relocated Pfizer’s headquarters to Ireland and shaved billions off its tax bill. It tried to take advantage of a practice that Obama has called “one of the most insidious tax loopholes out there.”
The strategy of corporations that use overseas deals to avoid high U.S. taxes is known as “inversions”, and it is highly criticized. However, the victory by the Obama administration is not likely to put an absolute stop to the practice.
According to the Lawmakers, the only successful way to stamp out inversions is tax reform in a comprehensive manner, which has proved to be a fraught issue between Republicans and Democrats on Capitol Hill. Until then, business groups protest that the government is cherry-picking its battles and inserting new uncertainty into the rules that govern the global trade.
“I don’t think companies should be intimidated by government. On the other hand, yeah, I’m glad to see Pfizer stay here, and I’m going to try and find a way whereby we can do this legitimately so they want to stay here,” said Sen. Orrin G. Hatch (R-Utah), chairman of the tax-writing Senate Finance Committee.
Democratic presidential candidates Bernie Sanders and Hillary Clinton have criticized the Pfizer deal at numerous campaign this year, and they each cheered the news.
“They call it an inversion. I call it a perversion,” Hillary Clinton said at an AFL-CIO convention in Pennsylvania.
As the largest proposed inversion in history, the deal was projected to save Pfizer about $35 billion in taxes.
Pfizer, Allergan call off $160 billion merger after U.S. moves to block inversions last edit: 2016-04-09T19:15:52+00:00 da