Monday 23 April 2018

Pfizer and Allergan chiefs say merger is good for America

Brent Saunders, the chief executive of Allergan. Photo: Bloomberg
Brent Saunders, the chief executive of Allergan. Photo: Bloomberg
Donal O'Donovan

Donal O'Donovan

Employees at Allergan have been told a proposed merger with Pfizer is about changing healthcare - not skirting tax law.

Allergan's global chief executive Brent Saunders has written directly to the company's employees - including around 1,000 in Ireland, telling them the controversial deal is not just about tax savings.

The deal will benefit the United States by boosting investment there, he said.

In his message to staff, Saunders directed them to read an article co-written by himself and Pfizer chief executive Ian Read and published in 'USA Today', America's biggest newspaper.

"The combination will expand our ability to invest in the US," they said in their joint article.

"There is a myth that we are skirting US taxes. Not true. All companies must pay taxes on US income regardless of where they are incorporated. The proposed combination will not affect the tax rate Pfizer pays on US-based income, reflecting our two companies' earnings and 30 R&D and manufacturing locations in the US. It also allows us to maintain a strong base of 40,000 high-skill, high-wage jobs in the US," they said.

The newspaper article is a response to trenchant criticism of the plan to merger Pfizer and Allergan into a new entity that will be registered, and tax resident, in Ireland.

US politicians have condemned the move, a so-called tax inversion, that allows a larger businesses to shift its tax residence out of the US by buying a smaller rival abroad.

Democratic presidential hopeful Hillary Clinton accusing Pfizer of using legal loopholes to avoid its "fair share" of taxes in a deal that she said "will leave US taxpayers holding the bag."

The front-runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details.

US Senator Bernie Sanders, Clinton's chief rival for the Democratic nomination, said the deal "would allow another major American corporation to hide its profits overseas."

On the far side of the political spectrum Republican front-runner Donald Trump said the deal was "disgusting" and that "our politicians should be ashamed".

But US officials have failed to block inversions.

Pfizer plans to move its tax address from the United States to Ireland by buying Allergan for $160m.

Writing in favour of the deal, Read and Saunders said moving to Ireland, a lower tax jurisdiction, will make it easier for the combined business to invest in the United States.

"The US has the highest statutory tax rate at 35pc, and is one of a few countries that tax overseas earnings when they are brought home to invest.

"The unfortunate irony is that an inversion makes it easier for an American company to invest in the US and less likely that it will face competitive tax disadvantages - or be acquired by a foreign competitor."

In a direct appeal to Americans, they said it will facilitate investment there.

"The combination will allow us to invest a combined $9bn in research and development, the bulk of it here in the US, making us one of the largest single R&D investors in America and expanding our ability to invest in the US," they said.

"All of our foreign competitors that do business in the US enjoy access to our resources," they said.

"The Pfizer-Allergan combination is good for America," the company chiefs wrote.

Irish Independent

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