I read a troubling story in the Financial Times about Pfizer’s bid to take over British drug company AstraZeneca.
One of the prime reasons that Pfizer is so interested is because the takeover would afford them the opportunity to redomicile the business in England.
Why do this? Because right now they’re paying US corporate tax… which is substantially higher than in the UK.
So by moving the business abroad, the company would save shareholders billions.
Uncle Sam has a big problem with this. And Congress is jumping all over Pfizer to block the deal… even going so far as to propose RETROACTIVE legislation.
In other words, they’re willing to go back in time to kill the deal before it even gets started.
(I’m reminded of the first Terminator movie when I think about this approach…)
The FT quotes Oregon Senator Ron Wyden as saying “I don’t approach retroactivity in legislation lightly, but corporations must understand that they won’t profit from abandoning the US…”
Ummm, actually that’s the whole point, Senator. The tax situation is so onerous that people do profit when they leave the US. That’s WHY people leave the US. Duh.
But like the drug companies themselves, Congress isn’t looking at the root cause. They’re treating the symptom.
In this case, the symptom is American businesses heading overseas to escape the highest tax regime in the developed world.
The federal corporate tax rate alone can be as high as 38%, and that’s before including state corporate taxes, or personal taxes on the dividend distributions to shareholders.
And that is precisely the underlying cause: everyone is taxed to the hilt so that the government can continue squandering it all and indebting future generations.
Anyone with the means can see the writing on the wall and is opting out of this system.
Bear in mind that what Pfizer is proposing is completely legal. There are no laws that prevent the company from acquiring another firm and moving the headquarters abroad.
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