Legion of Pfizer foes grows as price, inversion critics converge
The American pharmaceutical corporation Pfizer, the country’s second largest (barely edged out by Johnson & Johnson) is “maneuvering to dodge its U.S. taxes by ‘relocating’ —on paper— to Ireland, a notorious corporate tax haven,” according to the consumer protection group Fight Pharma Rip-offs, part of the Citizen.org group.
The euphemism for this type of tax loophole is “corporate inversion,” one of many strategies companies employ to reduce their tax responsibility. It’s a way for a company to re-incorporate abroad by having a foreign company buy its current operations. Assets are then owned by the foreign company. The old incorporation is dissolved.
Of course, the ethics, even the legality, of such manipulation is questionable at best. Pfizer, for example, has been benefitting from United States infrastructure, legal system, representative government, domestic tranquility, the corporate-friendly FDA, and more since it was founded in New York City in 1849.
“Pfizer’s real headquarters would remain in America, where the company would continue making billions and billions selling overpriced medications,” said Citizen.org in an email. “But by merging with a smaller company that has its paper headquarters in Ireland, Pfizer would be able to skip out on billions in taxes here at home every year.”
Asking its email subscribers to “Add [their] name[s] today [to a petition] if you oppose Pfizer’s scheme to desert America,” the citizens’ organization also pointed that “Pfizer benefits from American investments in research and development. American taxpayers provide Pfizer business by purchasing its products through Medicare, Medicaid and other public programs. American consumers spend still more, out of pocket and via insurance. Yet Pfizer executives want to desert the country from which they profit—and where they themselves live!”
Eight of the biggest U.S. technology companies have also added a combined $69 billion to their stockpiled offshore profits over the past year, even as some corporations in other industries felt pressure to bring cash back home, according to Bloomberg News.
“The money pileup, reflecting companies’ incentives to park profits in low-tax countries, has drawn the attention of President Barack Obama and U.S. lawmakers, who see a chance to tap the funds for spending programs and to revamp the tax code. That effort is stalled in Washington, and there are few signs that tech companies will bring the profits back to the U.S. until Congress gives them an incentive or a mandate,” Bloomberg added. At the same time, firms in some industries felt enough pressure that they chose to take the tax hit by bringing money home.
“Stryker Corp., a Kalamazoo, Michigan-based maker of medical devices, is planning to repatriate $2 billion this year,” reported Bloomberg.
“Keeping money overseas is particularly easy for technology and pharmaceutical companies whose profits stem from intellectual property that can swiftly be moved.”
The article cites Gilead Sciences Inc. as an example. “[Gilead] reported that it held $15.6 billion outside the U.S. as of Dec. 31, up from $8.6 billion a year earlier,” Bloomberg News said. That’s because the intellectual property for the company’s blockbuster drug—Sovaldi—was in Ireland before the Food and Drug Administration approved it in 2013.