How Major Companies Evade U.S. Taxes

How Major Companies Evade US Taxes

The following comments (in part) by Bernie Sanders were contained in a recent email to potential donors and those who will be voting in the upcoming presidential elections. Although it refers specifically to Pfizer, the tactics cited are being used by a number of American companies to evade US taxes.

"I want to tell you about something that encapsulates so much of what is wrong with our economy, our government and our corrupt political system. Then I'm going to ask for your help to stop it.

"Pfizer is a  giant pharmaceutical company based in New York City that has a history of overcharging Americans for prescription drugs. It's in the process of trying to merge with another company located in Ireland.

"If the merger is successful, Pfizer would technically become a foreign company, meaning it could dodge around $35 BILLION in corporate taxes here in America.

"Enough is enough. Pfizer and other pharmaceutical companies cannot be allowed to evade taxes and rip off American patients who already pay the highest prices in the world for prescription drugs. I sent a letter to Treasury Secretary Jack Lew asking him to prevent Pfizer from taking many of the steps it wants in order to avoid paying taxes in America.

"What Pfizer is trying to do is known as a 'corporate inversion.' In this case, Pfizer, an American company, is merging with a company based abroad. The result of the merger is a company with an address in another country –even though the majority of shareholders are still based in America.

"Pfizer apparently doesn't want to pay the $35 billion in taxes it would owe in America. I don't think that's right.

"No matter what, you can bet that Pfizer would continue to overcharge Americans for prescription drugs, too. Since 2014, the pharmaceutical company has hiked the prices of seven of its top selling drugs by an average of 39 percent.

"Pfizer also charges 12 times as much in the U.S. under Medicare for these drugs as it charges in Ireland, where it's claiming a new address for tax purposes.

"All of this is the result of years of weakened tax laws, an abdication of responsibility by American companies to their country, and a corrupt political  system that allows it to happen.

"And I believe we can stop it."

UPDATE:

Pfizer and Ireland-based Allergan Plc scraped their planned $160 billion merger when the US Treasury Department passed a new rule aimed at inversions. According to Reuters, although the new Treasury rules did not name Pfizer and Allergan, one of the provisions targeted a specific feature of their merger, Allergan's history as a major acquirer of other companies. The merger would have allowed New York-based Pfizer to reduce its tax bill by an estimated $1 billion annually by domiciling in Ireland, where tax rates are lower.

Allergan's Chief Executive Brent Saunders said, "It really looked like they did a very fine job at constructing a temporary rule to stop this deal and obviously it was successful."

Pfizer said it would decide this year whether to split off its hundreds of generic medicines into a separate business — a decision it had put off after announcing its deal with Allergan last November.