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And Another One Flies the U.S. Coop

The topic of corporate tax inversions rears its head with Pfizer announcing it will acquire Allergan for more than $150 billion and move tax base to Ireland.    

The topic of corporate tax inversions rears its head with Pfizer announcing it will acquire Allergan for more than $150 billion and move tax base to Ireland.   

Arundhati Parmar

And another one has flown the coop from the U.S. to the Emerald Isle - Ireland - that boasts a less onerous corporate tax burden.  
Drugmaker Pfizer announced Monday that will acquire Allergan, the original maker of the Lap Band since sold, for more than $150 billion, dwarfing the biggest medtech corporate inversion the nation saw in 2014. That was when the world's second largest medical device company — Medtronic  announced it would buy Covidien for $50 billion and establishing its new headquarters in Dublin, Ireland, where Pfizer will now also be based.

Investors don't particularly like the deal as shares of both companies fell on Monday - apparently the cost savings aren't as large as they hoped. 

Neither did politicians, as corporate inversions symbolize that rare topic than wins bipartisan aversion. The entire slate of Democratic presidential hopefuls slammed the deal with Hillary Clinton saying taxpayers would be left "holding the bag" and Bernie Sanders calling it a "disaster" of a deal that would drive up drug prices.

Corporations have defended tax inversions in the past by saying it would give them access to foreign profits that they can now put to use - in America - Medtronic has been one such organization. Pfizer's CEO pretty much said the same thing on Monday.

"It allows us to continue to sustain an investment of approximately $9 billion mainly spent in the United States," Ian Read told CNBC in a joint interview with Allergan CEO Brent Saunders after the announcement. Apparently, it's a "great deal for America."

Meanwhile Republican presidential candidate Donald Trump wants to make America great again, in part by stopping such tax inversions. He called the deal "disgusting" because it would lead to tremendous job loss.

Trump wants to bring down the corporate tax rate to 15% from the current 35% and make corporations pay a one-time 10% tax on their foreign profits to bring them back into the U.S. In the last GOP presidential debate on Fox News, Trump boasted that he has been praised for his 10% stance.

President Obama has said that he would support a 28% corporate tax rate, down 7 percentage points from the current rate as well as a 19% tax on foreign income instead of the full 35% tax rate. He has also offered a 14% one-time repatriation tax to bring back stockpiled cash sitting overseas.

Senator Elizabeth Warren has called that 14% approach a "juicy smooch"

Clinton has also said she would pursue tax reform, and said she will unveil details about ways to manage corporate tax inversions soon. 

Arundhati Parmar is senior editor at MD+DI. Reach her at [email protected] and on Twitter @aparmarbb

[Photo Credit: user sonicken]

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