Pfizer dodging $35B in taxes
U.S. pharmaceutical giant Pfizer (PFE) is trying to dodge an estimated $35 billion in taxes by merging with Ireland-based rival Allergan and shifting its headquarters overseas, a coalition of labor and consumer groups charged Thursday.
In a new report, Americans for Tax Fairness said the New York-based maker of Lipitor, Viagra and other well-known drugs would take advantage of lower tax rates in Ireland while reaping the benefits of having its operations in the U.S. under a $160 billion corporate tax inversion deal announced with Allergan in November.
The transaction is undergoing regulatory reviews even as the Obama Administration has tried to block such deals on grounds that they could undermine the nation’s tax base.
Pfizer is pursuing the Allergan deal in the wake of raising the prices of dozens of prescription drugs by at least 10 times the rate of inflation since 2012, the coalition contended. The group’s members include the AFL-CIO, the American Federation of Teachers and other labor unions, as well as consumer watchdogs like Public Citizen’s Congress Watch.
“By dodging taxes while boosting prescription drug prices, Pfizer squeezes American families and communities from two sides at once,” said Frank Clemente, executive director of the coalition.
In a responding statement, Pfizer said the deal with Allergan would “create a global, R&D-focused company with the ability to lead in the quest to find cures and treatments for patients with the most feared diseases and conditions of our time, such as Alzheimer’s disease Parkinson’s disease, cancer and rare genetic disorders.”
“This transaction is not structured to move jobs out of the United States, where we conduct the majority of our research,” added Pfizer.
However, the report said Pfizer appeared to be overstating the U.S. tax rate on the company’s worldwide income, which was reported as 25.5% in 2014. The coalition charged:
- Pfizer’s effective 2014 tax rate was an estimated 7.5%, and the company averaged an effective rate of 6.4% from 2010-2014. The discrepancy results from large provisions that Pfizer includes in its filings for U.S. taxes that won’t be paid unless the company transfers funds from its overseas units back to the U.S., the report said.
- The drugmaker had as much as $148 billion in profits held overseas, untaxed by the U.S., at the end of 2014. The funds consists in permanently reinvested earnings and other foreign profits, the report said.
- The company reported losing more than $16 billion in the U.S. from 2010 through 2014, while it earned $78 billion in overseas units. The discrepancy likely resulted from profit-shifting to foreign tax havens, because Pfizer had 38% of its sales and 48% of its assets in the U.S. in 2014, the report said.
Pfizer shares closed 1.9% higher at $30.59.