Explainer: Pfizer-Allergan - what is tax inversion?
Tax inversion is the term used for the relocation of a firm’s legal domicile to a lower tax county while usually keeping its material operations in the country of origin.
In the Pfizer/Allergan case, the latter is based in Ireland, where our low 12.5pc corporation tax rate is already controversial.
The Pfizer/Allergan deal is the largest inversion case of all time. In a $160bn transaction, the company plans to move its tax address from US to Ireland.
While the move is on paper, by buying and merging into Allergan, a smaller competitor based in Dublin, it is accessing the lower 12.5pc corporation tax move.
The combined company will be called Pfizer and will be run by Pfizer's CEO, with executive management staying in New York and extensive operations across the United States, but it will no longer be taxed as a US company.
Over the past three decades many other deals have been done including Medtronic, Fruit of the Loom and Ingersoll-Rand.
US congressional researchers have estimated that unchecked inversions will cost the US close to $20bn in the next 10 years.
(additional reporting Reuters)