Pfizer-Allergan Deal

Leaving Home and Tax Obligations Behind

A company logo is seen through branches at a Pfizer office in Dublin, Ireland November 24, 2015. Pfizer Inc said on November 23 it would buy Botox maker Allergan Plc in a deal worth $160 billion to slash its U.S. tax bill, rekindling a fierce political debate over the financial maneuver. REUTERS/Cathal McNaughton
A Pfizer office in Dublin.
  • Why it matters

    Why it matters

    A G20 plan aims to stop tax-avoidance schemes, but it’s an open question which nations will enforce it.

  • Facts

    Facts

    • The Pfizer-Allergan deal is expected to save Pfizer billions in tax payments annually.
    • Ireland’s corporate tax rate is 12.5 percent. In the U.S., Pfizer faces a rate of 35 percent.
    • The heads of the world’s 20 largest industrialized nations agreed to new regulations about such tax-sweetening deals a week ago.
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  • Audio

    Audio

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One thing that’s needed in finance ministers’ international fight against excessive tax evasion by corporations is a lot of patience. The wait for legislative action can seem endless.

Many initiatives launched since the 1980s, most of them coordinated by the Organisation for Economic Co-operation and Development, lost their momentum.

The global financial crisis finally made the G20, the group of the 20 largest industrialized and emerging countries, agree to new regulations. As of 2017, the Base Erosion and Profit Shifting (BEPS) plan aims to stop tax-avoidance schemes that allowed company profits to be shifted across borders and prevent home nations from getting their proper tax payments.

A week ago, G20 heads of states and governments agreed to the BEPS plan. Since then, discussions have been dominated by the question of which countries will actually enforce the new regulations. In Germany, members of the lower house of parliament, the Bundestag, are hearing from corporations that in the end the nation’s authorities might have to sacrifice tax payments at the expense of other countries.

With this background, perhaps one of the most effective incentives for all G20 governments to continue the fight was the just-announced buyout by the U.S. pharmaceutical giant Pfizer of the considerably smaller Irish firm, Allergan.

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