Pfizer’s Big Breakthrough: Global Tax Avoidance
There is an entire class of hedge fund who make their money by only investing in the stock of companies who are merging.  This is called merger arb and this deal is a huge one.<p>Unfortunately it is about as uncertain as a deal can be due to concerns about the government not allow the merger.<p>For those of you who don&#x27;t follow corporate mergers, there has been a trend recently of larger american based corporations doing mergers with smaller foreign companies to move their head quarters to another country where the corporate tax rate is lower, these are know as tax inversions.<p>Burger King famously recently merged with Canadian &quot;icon?&quot; Tim Hortons in an attempt to domicile the corporation in Canada to lower their tax rate.<p>This is only going to intensify and its corporations telling America that their corporate tax rates are too high.<p>The US has a tax rule specific to itself where by it taxes corps at 35% on profit no matter which country it was earned it.  It does let companies deduct taxes paid to foreign governments but it leads to companies operating in a way to minimize their US taxes.<p>From the article linked at the bottom[0]:<p>&gt; Pfizer takes in about 40 percent of its revenue from sales in the United States and 60 percent from foreign sales. Yet, according to its 2014 annual report, Pfizer had about $17 billion in pretax income from overseas, and almost a $5 billion pretax loss here in the United States. By shifting profits overseas, Pfizer pays relatively low cash taxes compared with the nominal United States tax rate of 35 percent. Instead, much of its American tax liability is illusory, taking the form of an obligation to pay taxes in the future if it repatriates cash to the United States.<p>This leads to companies jumping through hoops to shift earnings income around and to holding large chunks of cash off shore of the US.<p>This might be upsetting to some people who think corporations don&#x27;t pay enough taxes but it&#x27;s not going to go away.  The world isn&#x27;t going to get more protectionist, especially on the heals of TPP.<p>The US needs to deal with this.<p>[0]<a href="http:&#x2F;&#x2F;www.nytimes.com&#x2F;2015&#x2F;11&#x2F;25&#x2F;business&#x2F;dealbook&#x2F;why-pfizers-deal-may-change-the-system-oftaxing-multinationals.html?_r=0" rel="nofollow">http:&#x2F;&#x2F;www.nytimes.com&#x2F;2015&#x2F;11&#x2F;25&#x2F;business&#x2F;dealbook&#x2F;why-pfiz...</a>