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With $160 Billion Merger, Pfizer Moves To Ireland and Dodges Taxes (arstechnica.com)
ourlovecanlastforeve writes: In a $160 billion dollar acquisition, drug company Allergan, a small company based in Ireland, "purchased" Pfizer, allowing the drug producing giant to move to Ireland and lower its tax rate from about 25 percent to 17-18 percent. Ars reports: "Such inversions, which are said to cost the American government billions in lost tax revenue, have drawn scorn from the Obama Administration and the Treasury Department. Last year, President Obama referred to the deals as 'unpatriotic' loopholes and proposed to close them. And last week, the Treasury announced new rules to make such deals more difficult. But Pfizer’s reverse-inversion skirts the rules, in part by keeping ownership split somewhat evenly between the two companies. After the deal is complete, current shareholders of Allergan, which has the majority of its operations in the US, will own 44 percent of the mega company. The remaining 56 percent will be owned by current Pfizer shareholders."
How about we just lower our tax rate to 15%? We would then be a favorable place to have business and while not cashing in on $0 at the higher rate we would at least cash in on some taxes.
Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.
America should be punished for having such a ridiculous tax code and a confiscatory corporate tax rate. I'd also move my operation to Ireland if I could.
What's stopping you?
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if you believe all income belongs first to the state. All this is legal, and the whining that inevitably goes on after such transactions reflects the belief that the "fair share" of a corporation's income is less than whatever the speaker wants it to be.
When what's legal and what's sustainable for the society are not aligned, there are likely one of two results: 1) Law is changed to be more sustainable or 2) the society suffers.
But hey, more power to those who can screw over everyone else for their tax free money!
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until our politicians wake up and realize all costs are pushed onto the consumer anyway nothing will change
They know already, and don't care. They count on the average person not knowing that.
Perhaps, the lack of one to move.
until our politicians wake up and realize all costs are pushed onto the consumer anyway nothing will change
its not a "loophole" its the law, and until the law is favorable to business, business will continue to move to places that are business friendly. We see it on a microscale in the USA as it is, look at all the companies who are based in delaware.
Delaware is only for corporate law adjudication. Taxes are still collected for revenue or operations in other states (i.e., if you have a footprint or customers there, you still pay).
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when Ireland drops theirs to to 10%? I guess we could do 5%. Then they'd do 2 and a half, then we'll do 1 and they'll do -5% (e.g. incentives) and we can top that with -10%....
See, this is what's called a "Race to the Bottom". The correct response is to tell Phizer: Thanks, and by. Then you slap a 50% tarriff on their drugs and enforce strict price controls. If that doesn't work you take their patents from them. If they stop "innovating" then fine. We hire folks to innovate in their place and tell them to go pound sand. What you do _not_ do is let them control negotiations and play their game. You will lose sir.
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It seems like if we had any sense at all, we'd immediately dump the corporate income tax and replace it with a revenue-neutral increase in the capital gains and dividend taxes. The corporate shareholders ultimately end up paying any dollars that get paid anyway, and humans are much easier to tax than corporations are. A corporation is a shape-shifting non-entity that can "spend a year dead for tax purposes," so trying to change the laws fast enough to get any revenue out of them is a losing battle. All we end up doing is giving them an incentive to do ridiculous things like hold money in foreign accounts and set up subsidiaries all over the world to move revenue around. It's great for the tax lawyers and financial consultants, but it doesn't really get us any real revenue. It's the tax enforcement equivalent of the drug war.
An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
When what's legal and what's sustainable for the society are not aligned, there are likely one of two results: 1) Law is changed to be more sustainable or 2) the society suffers.
But hey, more power to those who can screw over everyone else for their tax free money!
If what the company is doing is not sustainable, the company will fail, as it should. If what society is doing is unsustainable, it will fail, as it should. It's called capitalism and if you leave it alone, you'd be surprised at how good it works.
What would you propose? We block companies from doing these kinds of inversions? They'd just transfer their entire operation overseas and then the US would see zero percent of that income. There are any number of other countries that would LOVE to have them, as is evidenced by their lower tax rates and success in luring said companies.
The stupidity is the assumption you can somehow control these companies, or punish them for their actions. Controlling them is impossible so long as there are other places to do business. Punishing them does nothing but punish those who consume their products or services. Putting them out of business adds to unemployment. Banning their products or services from the US market would damage consumers *and* employees. You know...employees...those people who work hard every day to take home a paycheck to their families. Not everyone at a corporation is Scrooge McDuck burning hundred dollar bills to warm their gold-plated mansion.
No, the answer is to lower our corporate tax burdens and win this business back to US shores and the US tax system. It doesn't take a genius to realize that 15% of something is better than 26% of nothing.
In the end they will lay their freedom at our feet and say to us, Make us your slaves, but feed us. - Fyodor Dostoyevsky
I'd also move my operation to Ireland if I could.
What's stopping you?
The US tax code. The US keeps its hooks in its citizens and companies, for decades, if they try to leave, even if they move out and renounce their citizenship.
The US does this to a far greater extent than other countries who generally don't tax their citizens if they're out of the country for more than half a year. (This is where "The Jet Set" came from: Citizens of various non-US countries who had found a way to earn a living that let them split their time among three or more countries every year and avoid enough income tax to live high-on-the-hog, even on an income that otherwise might be middle-class.)
Only really big companies, with armies of lawyers, can find loopholes that let them effectively move out of the US to a lower-taxing alternative. You'll note that TFA is a lament about how one managed to escape, and how the US might "close THIS loophole" to prevent others from using it.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
What's wrong with corporations making and keeping profit? Do you really believe the government inherently spends that money better? But that's a bad argument on my behalf because the government gets their cut eventually: those corporate profits have to be taken as income in one form or another eventually for them to be any good to anyone. That means any of these: bonuses, dividends, investment in the company and hiring.
Every one of those options directly benefit society through the exact same tax plus more jobs. There is literally no way to realize the benefit of corporate profits without a net benefit to society and the government, unless you're breaking the law. The only difference is the corporation had options and the flexibility of cash flow. Again, do you really think the government does a better job taking that money up front and using it as they see fit? Why? Because the average bureaucrat has proven themselves to be so much more competent than the people that actually generated the revenue? Nothing tells me a person is clueless quite as fast as the prototypical "corporations shouldn't be able to profit" moron.
Oh and by the way, every single concept described above applies to small business as much as large corporations.
This is pretty bold (not really the right word) of Pfizer to move overseas, considering that they, along with the rest of big Pharma are the ones who lobbied to make it illegal for Americans to import cheaper prescription drugs. Maybe Pfizer should be required to sell their drugs in the USA for the price they charge in Ireland.
Exactly! The only way to fix this problem is by taxing the products when they enter the country. It's ridiculous to allow corporations to hide billions overseas.
Pfizer makes 60% of it's revenue outside the US. Why should they pay US taxes on profits earned entirely outside the US? Other countries do not tax foreign profits the way the US does.
Obviously Pfizer doesn't think they should be subject to such an unfair system. They found a way out. They will still pay US tax on US profits.
Invalidating their drug patents and contracting another drug maker to start manufacturing their portfolio as generics would do the job much better. You would probably only have to do it once and that would fix the problem for a decade until another evil gang of corporate sociopaths tried it again.
The world's burning. Moped Jesus spotted on I50. Details at 11.
Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.
You're thinking too small and you're risking a lot of lives. Don't forbid the payments; threaten the underlying patents.
Seattle Times. Key phrase: "Inverted corporations must still pay U.S. taxes on the profits they earn in the U.S." But read the story for more info.
Also lmgtfy.
The poster is totally right. Think of how much larger the benefits brought to the world by the likes of Union Carbide, Metropolitan Edison, TEPCO, Triangle Shirtwiast, Kader Toy, and Aurul would have been if only freed from pesky government crap like taxes.
The only way to fix this problem is by taxing the products when they enter the country.
Except we have treaties that forbid us from doing that. If we violate trade agreements, other countries will retaliate, and the world economy will spiral downward. For an example of this scenario actually happening, Google for "The Great Depression".
It's ridiculous to allow corporations to hide billions overseas.
It is ridiculous for America to tax profits on a product made in England and sold in France. It is ridiculous to have absurd tax laws that encourage companies to move jobs overseas. We should tax domestic sales, or domestic revenue, or domestic payrolls, or even domestic profits. But instead we tax worldwide profits, of only companies domiciled in America, giving them a huge incentive to go elsewhere. No other country has a tax like that. It is economic self-sabotage.
Rich people don't want their taxes to go up to 15%.
You are welcome on my lawn.
Source to that last point that they pay tax on US profits?
I'm sure they will happily pay tax on any profits they have left after they pay their foreign subsidiary based in Ireland all the management and consulting fees, deduct the inflated research and development expenses, and sales and marketing campaign subcontracts, and extra profit surcharges...
They're altering the deal. Pray they don't alter it any further.
If you ask nicely, they may throw in the floor mats.... Or not...
Because corporations are magical persons who can change nationality, location and regulation by saying the magic words, "Free Market" while rubbing currency in the crack of a politician's ass.
You are welcome on my lawn.
Gotta understand the decision-making process for politicians:
1) These companies are big donors.
2) 90% percent of the population has no idea about this, and fewer care.
3) Politicians get cash for looking the other way, and it has no impact on their electability.
I started following these kinds of shenanigans prior to the financial crisis. The blame is on the politicians - not for being self interested, but for actually undermining the society for cash and favors from big donors. The vast majority of the voting public doesn't understand this kind of inside baseball. And the incumbency rate hasn't really changed much as a result of these issues. So the boiling of the frog (this society) will continue until we become Brazil or we snap out of the torpor.
"A society cannot be both ignorant and free." -- Lady Gaga
It's ridiculous to allow corporations to hide billions overseas.
Quid pro quo...
“He’s not deformed, he’s just drunk!”
When TRUMP is elected, America will win so much, we will get tired of winning!
Invalidating their drug patents and contracting another drug maker to start manufacturing their portfolio as generics would do the job much better.
Then the flow of companies and jobs leaving America will turn into a torrent. You don't encourage people to stay by building higher walls and becoming more hostile.
Pfizer was here and paying taxes. Now they are not here and won't be paying taxes.
What policy exactly would prevent that?
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
when you have practical monopolies created when a small group of people own everything. Try to find something in your house you use day to day that isn't made by one of the Koch Brothers companies for instance. Played any of the Saints Row games? They own those (among others). You Toilet paper was probably made by them (there's a joke in there somewhere) and a lot of your food. Plus a tonne of your energy/oil.
Also for medical care you're not really free to make choices. For one thing without 6-10 years of study you don't really have enough information. For another thing if you have cancer and need chemo you're not exactly free to say no. This is a classic mistake folks make. You're comparing the decision making processes of buying a twinkie to the process of buying a heart transplant. While you might technically be 'buying' both, the processes are really nothing alike, and frankly you wouldn't want them to be.
Tax rates can be negative if the money comes somewhere else. Think of a retailer running scams. He doesn't scam his big clients because they will sue him or send thugs around to hurt him and his family. So he scams his little clients. Basically you and I pay our taxes so the big guys that own everything can own everything.
Now, I can already here you railing against taxes again so I'll say this: It's OK to pay taxes (render unto Caesar, yadda, yadda, yadda) , as long as you're getting something for it. What I hate about being an American is that I pay about the same a Europeans but without the free health care, social safety net and economic policies that raise my wages...
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You can't easily define "domestic" versus "worldwide" profits. Profits come from more than just sales. What we have is essentially income tax for corporations. If I earn money overseas and am not taxed by a foreign entity then I have to pay taxes on it here. For individuals this means you can't use the loophole that you were paid in a different country even though you lived in the US (yes this is slightly broken as it applies even to ex-pats who have not renounced citizenship). So it's essentially the same rule should apply for corporations - if you want to be called a "US company" then you need to pay US tax rates. If the companies don't like it then they can take their headquarters and move it overseas also, since they've long since moved all their actual workers overseas.
Note also that this company is going to pay taxes in Ireland. Not in high tax parts of Europe. They chose Ireland specifically because it's a low tax state trying to attract more companies, not because the US is the one and only undesirable tax location. The US has a much better corporate tax deal than many other countries, it's just not the minimum that the major shareholders want.
But it's the US. Poor people have to pay taxes, rich people have access to loopholes. That's why it's unpatriotic, because it shirks the shared responsibility that is a part of being a citizen. If taxes are too high, then this is a problem that should be fixed across the board and not just for mega corporations.
What percentage of Apple's profits did the US government earn?
You can't easily define "domestic" versus "worldwide" profits.
Yet every other country in the world manages to do it. Only America taxes extraterritorial profits.
if you want to be called a "US company" then you need to pay US tax rates.
You are missing the point. Pfizer does NOT want to be called a "US Company". They want to be an Irish company.
If the companies don't like it then they can take their headquarters and move it overseas
You are missing the point even more. TFA, and Obama's rants, make the point that companies should NOT be able to move away. There is a movement to erect a Berlin Wall for businesses. Many businesses, like Pfizer, and getting out while they can, and taking their HQ jobs with them.
If you have over $2 million in total assets, the Federal Government will demand a slice of that before you can expatriate. Yes, those are accumulated assets that have already been taxed when first gained. Renouncing really doesn't solve the problem...
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
Well based upon citizenship. If they don't like the duties that comes from citizenship then they can move away and renounce it.
They are trying to move away. That's what this article is about.
Then Pfizer should move to Ireland. All executives should live there. The headquarters should be there. The only thing in the US that should remain is their foreign sales office. But they're going to play the games on paper, they'll keep the big executives here but claim that they're just part of a subsidiary of Pfizer. So no one is actually leaving, jobs aren't shuffling around except for a few management reorgs, it's business as usual but with a lower tax rate.
How often did Apple employees use U.S. roads, rely on U.S. public education for their children in primary school or college, drink water provided by the state or federal government, use telephone or network infrastructure developed and constructed by the government, benefit from federal safety regulations on aircraft? Do you think all those things appear for your benefit at no cost or obligation from you?
There's a fuel tax to pay for roads.
There's a property tax and a state income tax and a state sales tax to pay for education for children.
There's a state income tax and a state sales tax and tuition to pay for colleges.
There's a water bill from the water district every 2 months to pay for water.
There's a telephone bill and a special telephone tax to pay for phones, and an internet bill to pay for Internet.
There's an airline ticket tax to pay for air traffic control.
But the question was: what percentage of Apple's profits did the US government earn? Any thoughts on that?
1. The $2M sum is only a test for eligibility.
2. Tax is payable on unrealized gains, not total assets:
There is a $680k deduction, which is unrelated to any primary residence:
The real "Libtards" are the Libertarians!
You've provided reasonable links, but you simply haven't read that information correctly. Here's how the U.S. Expatriation Tax actually works (assuming your net worth exceeds $2 million or that you otherwise are subject to the Expatriation Tax), oversimplifying only slightly:
1. Take your total worldwide net worth at fair market value as if all your assets were sold the day before your expatriation date.
2. Subtract your total worldwide cost basis from your net worth. The result is your total gain from your mark-to-market "deemed sale."
3. Subtract $690,000 (tax year 2015, adjusted annually for inflation) from your total gain. The result is your total taxable gain. If your total taxable gain is zero or negative, stop: you do not owe any Expatriation Tax.
4. Otherwise, pay ordinary capital gains tax rates on your total taxable gain, with a current top marginal tax rate of 23.8% (if the NIIT applies, and I'm not sure it does, but let's assume that). This is your total U.S. Expatriation Tax.
If you owe Expatriation Tax your cost basis is reset. Any subsequent capital gains on U.S. assets will only be taxed based on your new, reset cost basis. Note that "wash sale" rules do not apply when making the Expatriation Tax calculation, so deemed sale capital losses are not limited within the calculation. To some degree you can pay your Expatriation Tax in installments if you wish and only pay statutory interest on deferred payments (currently 3%). If your assets are generating a higher after-tax rate of return (quite likely) then stretching out your Expatriation Tax payment to the maximum extent allowed by law is a good idea. You may also wish to stretch out your Expatriation Tax payments if you prefer to raise funds more slowly, perhaps as in the form of interest, dividends, royalties, and/or earned income.
The U.S. Expatriation Tax is not a hardship by any reasonable definition of hardship, and it's quite disingenuous to complain about not getting a $250,000 capital gains exclusion on a home when you're getting a $690,000 blanket exclusion. But if it were a hardship, there's a simple, 100% effective solution to avoid the U.S. Expatriation Tax: don't renounce or relinquish U.S. citizenship.
The answer is the money has to come from somewhere or you may as well be living in a hole in the ground in Syria. What is a fair amount is complicated and frequently disputed, but remember, every bit of tax Apple dodges is a bit more incentive for your government(s) to try to get it out of your skin instead since you are a softer target. Hence it pisses people off when Apple avoids tax and they cannot.
"A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but that money must come from somewhere: from reduced returns to investors in the company, lower wages to its workers, or higher prices that consumers pay for the products the company produces." [CBO report "THE INCIDENCE OF THE CORPORATE INCOME TAX"]
This report goes on to say:
Although economists are far from a consensus about exactly
who bears how much of the burden of the corporate income tax, the existing studies
highlight the significant types of economic mechanisms as well as the empirical
estimates necessary for further quantifying the burdens. CBO's review of the studies
yields the following conclusions:
o The short-term burden of the corporate tax probably falls on
stockholders or investors in general, but may fall on some more than
on others, because not all investments are taxed at the same rate.
o The long-term burden of corporate or dividend taxation is unlikely to
rest fully on corporate equity, because it will remain there only if
marginal investment is not affected by those taxes. Most economists
believe that the corporate tax system has some effect on investment
decisions.
o Most evidence from closed-economy, general-equilibrium models
suggests that given reasonable parameters, the long-term incidence of
the corporate tax falls on capital in general.
o In the context of international capital mobility, the burden of the
corporate tax may be shifted onto immobile factors (such as labor or
land), but only to the degree that the capital and outputs of different
countries can be substituted.
o In the very long term, the burden is likely to be shifted in part to
labor, if the corporate tax dampens capital accumulation.
o Most attempts to distribute the burden of corporate taxation have
neglected the possible importance of effects on the relative prices of
products.
'Reagan' is just a shortcut for 'Supply-side economics'. Reagan happened to be the politician that pushed it through the first time. Of course, it was always a think-tank generated pile of crap intended to put a gloss of 'economic science' on a political movement to end progressive taxation. The theory behind the Laffer curve couldn't be disproved on its face, except by trying it. But now that it's been tried and tried again, it's been proven that lowering taxes does not pay for itself in terms of increased growth. That's the quaint, counter-intuitive theory behind supply side economics. It was a quaint theory in 1980. Since 1984 or so, it's just been a lie. One repeated by every Republican candidate for president in every debate since...
Posted from my Android phone. Oh, I can change this? There, that's better...
You act like the US is the only one that complains about this.
http://www.techeye.net/busines...
http://www.theguardian.com/bus...
http://www.theguardian.com/bus...
http://www.europarl.europa.eu/...
http://www.scmp.com/news/world...
Heck, it has been all over the news that Europe is flipping their shit about their companies moving to tax havens and offshoring profits.
There are no international norms, all countries (except the tax havens) are bitching about this happening.
APK likes to ask for responses to the same things over and over. Maybe he just likes the responses?
Why does the Tax Foundation leave out payroll taxes? That's the question you need to ask yourself.
You are welcome on my lawn.
Nurse! He's off his meds! Security!
Of their adjusted income. The middle/working class get to make vastly fewer "adjustments".
You are welcome on my lawn.
I suppose that deductions for dressage horses and yachts are technically available to middle/working class people, except middle/working class people don't own dressage horses and yachts. So, it's fair to say that these deductions have been designed and implemented to benefit the rich.
I think you're just being disingenuous now. You're dismissed.
You are welcome on my lawn.