No Tears For Pfizer

If you've been following business news, you recently learned that the pharmaceutical firms Pfizer and Allergan have backed away from their plan to do an "inversion" after it appeared that new rulemaking had altered the tax benefits they could reap from it.

Inversion is such an appropriate-sounding word!  It calls to mind the process by which an octopus (I think) or a starfish digests food by turning its stomach inside-out to engulf its prey. 

But actually it's not that (not quite). In my layman's terms, it's just an accounting/tax loophole that has allowed quite a few large U.S. firms to go through the pretense of merging with a foreign company, saving big on U.S. taxes while preserving all the real benefits of being a U.S. company.  Pfizer and Allergan were about to do that. I owned stock in Pfizer until a couple of months ago, but sold it on the news of the inversion plan. 

I'm glad to see Pfizer having to cancel its plans.  I think it's just, even if the companies involved do want to grumble about "changing the rules" or legislation aimed at just one specific act. 

At the same time, however, the whole episode, and the swell in popularity of "inversions" in recent years, reflects another dysfunction of our current government stalemate, because something ought to have been done about the problem years ago, but wasn't.  Ten or twenty years ago, U.S. corporate income tax rates at 35% were among the lowest in the industrialized world.  In the intervening years, though, many countries have reduced their rates while the U.S. did nothing. A fix is needed. 

Comments

[Dick Klade]

Right on. It is shameful that this sort of trickery has been allowed to go on so long. My son was a loyal Pfizer employee for many years, but was "down-sized" when he was within two years of having retirement benefits guaranteed. This firm, in my opinion, no longer has respect for its own people or our country.

[PiedType]

I'm with you. No tears for Pfizer. I've no tears for any of the pharmaceutical companies. Their profits are obscene and so are their ethics.