Pfizer's move loses billions for U.S.

[Benton]

Some of the talk around Pfizer wanting to flee to Ireland has made me wonder about a couple things. Namely, if the Newsweek article is right, why would the U.S. continue any kind of support for a corporation that's no longer paying those taxes here?

And — if the other two are right — why would we continue to allow losses to be deferred if companies are going to rack up tens of billions and then leave? Maybe someone with a better understanding of how that works can dumb it down for me, but that seems like a ridiculous flexibility that companies like Pfizer could just abuse without much benefit to those paying taxes and floating that loss.

http://www.newsweek.com/how-pfizer-should-be-punished-deserting-america-401895

Quote:Just like that, Pfizer has decided it’s no longer American. It plans to link up with Ireland’s Allergan and move its corporate headquarters from New York to Ireland.

That way it will pay less taxes. Ireland’s tax rate is less than half that of United States. Ian Read, Pfizer’s chief executive, told The Wall Street Journal the higher tax rate in the United States caused Pfizer to compete “with one hand tied behind our back.”

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Read said he’d tried to lobby Congress to reduce the corporate tax rate (now 35 percent) but failed, so Pfizer is leaving.

Such corporate desertions from the United States (technically called “tax inversions”) will cost the rest of us taxpayers some $19.5 billion over the next decade, estimates Congress’s joint committee on taxation. Which is fueling demands from Republicans to lower the corporate tax rate.

Donald Trump wants it to be 15 percent. Mike Huckabee and Ted Cruz want to eliminate the corporate tax altogether. (Why this would save the Treasury more money than further corporate tax inversions is unclear.)

Rather than lower corporate tax rates, an easier fix would be to take away the benefits of corporate citizenship from any company that deserts America.

One big benefit is the U.S. patent system that grants companies like Pfizer longer patent protection and easier ways to extend it than most other advanced economies. In 2013, Pfizer raked in nearly $4 billion on sales of the Prevnar 13 vaccine, which prevents diseases caused by pneumococcal bacteria, from ear infections to pneumonia—and for which Pfizer is the only manufacturer.

Other countries wouldn’t allow their patent systems to justify such huge charges. Neither should we—especially when Pfizer stops being an American company.

The U.S. government also protects the assets of American corporations all over the world. In the early 2000s, after a Chinese company replicated Pfizer’s formula for Viagra, the U.S. trade representative put China on a “priority watch list” and charged the country with “inadequate enforcement” against such piracy. Soon thereafter the Chinese backed down. Now China is one of Pfizer’s major sources of revenue.

https://www.washingtonpost.com/news/wonk/wp/2015/12/07/why-the-u-s-should-pay-irish-drug-prices-if-pfizer-wants-to-pay-irish-tax-rates/

Quote:After all, there is a lot of money at stake on each side of the ledger. The federal government stands to lose a large portion of annual taxes Pfizer pays, which totaled $1.2 billion in 2014. It would also lose perhaps as much as $48 billion in deferred taxes the company will eventually pay if it repatriates dollars that are already overseas.

Quote:Even so, just looking at seven of Pfizer's top 10 U.S. sellers (two have unpublished Irish prices, one is not approved in Europe), and compare those prices to the rock-bottom prices paid by the Veteran's Administration, which would give us the lowest estimate of how much we might save, there is a lot of money on the table. We paid $5.7 billion more than we would have with Irish prices in 2014. Using the more realistic prices that Medicare beneficiaries pay to estimate the average cost of Pfizer drugs, we paid $6.6 billion more. And that's for just seven of Pfizer's hundreds of drugs.

In other words, letting Pfizer's drug prices here fall to Irish levels would actually compensate the federal government, which is a major purchaser of Pfizer’s drugs through Medicare, Medicaid and the VA, for the lost tax revenues.

http://www.ft.com/cms/s/0/c64c06a8-91e3-11e5-bd82-c1fb87bef7af.html

Quote:Pfizer’s reported earnings have been dented by the need to earmark money for future US taxes on its offshore profits, which has accounted for nearly two-thirds of its tax charge over the past four years.

Excluding these “deferred” taxes, its tax bills in the US have been relatively low because it has reported nearly $14bn of losses in the US over the past four years. Its US tax bill totalled a little more than $1bn over that period.

[*michaelsean*]

I don't understand it all either, but I will say that a company is free to leave if they choose, but then they can turn to their new government for whatever it is they need.

[Mike M (the other one)]

What a cry baby, I would say, C'est la vie, and guess what, once you are out, all of your patent protections will expire immediately.

[Belsnickel]

I am definitely of the mindset that if a country wants to go, let them. But we aren't going to be there for them in any way. Unfortunately our government doesn't do that.