The Tax-Dodging Marriage of Viagra and Botox

This op-ed was originally distributed by CommonDreams.org and is reprinted under a Creative Commons license.

Throughout the fall, Pfizer, the maker of Viagra, has been courting Allergan, the manufacturer of Botox. Pfizer was not attracted by Allergan’s wrinkle-free face or full lips, but by its Irish “citizenship.”

In its proposal to Allergan, the Viagra-maker whispered, “If we get together, we can really stiff the tax man.” In order to fulfill this goal, Pfizer would renounce its U.S. incorporation and take on Allergan’s Irish registration. Add into the mix the fact that most of Allergan’s employees continue to work in the U.S. (where two-thirds of the company’s sales take place) and Pfizer’s executives would continue to operate out of New York, and the union becomes very questionable. But when tax time comes, both would proudly declare with a straight face, “We’re Irish,” making much of their combined income off-limits to U.S. tax collectors.

Pfizer is far from the first major U.S. firm to undertake this tax dodge in an attempt to avoid its responsibility to pay taxes. Since the 1980s, more than 50 U.S. multinational firms have executed the maneuver, known as a corporate inversion.

President Obama called Pfizer’s move “unpatriotic,” and he has urged legislators to close the loopholes in the tax code that make such a merger possible.

While corporate executives were celebrating the proposed merger, others at Pfizer were continuing normal operations, which draw heavily on taxpayer-funded services and subsidies designed to support American businesses.

For example, in the days following the announcement of the merger, Pfizer joined other pharmaceutical companies in calling on Congress to enact a new law making it easier for drug giants to use federal courts to pursue trade secrets claims against their competitors.

We, as taxpayers, help American businesses pay for everything from their research and development to highways to deliver their products. According to Pfizer’s filings with the Securities and Exchange Commission (SEC), in 2014, taxpayers provided Pfizer and its shareholders with $1.1 billion through the Research and Experimentation and Domestic Manufacturing tax credits alone.

By attempting to invert, Pfizer is declaring that it wants no part in paying for all of the public services that have allowed the company to grow and thrive over the last 166 years. It doesn’t want to help pay for the public univerities that have educated many of its scientists, nor is it willing to help pay for the roads, airports, and postal services the company relies on to get its products to consumers.

What’s the prescription for curing Pfizer’s allergy to paying taxes?

Congress and the Treasury Department could start by limiting access of inverted companies like Pfizer to taxpayer-funded services and public subsidies. If companies choose to renounce their U.S. incorporation, why should they continue to receive subsidies to support their research costs or continue to be able to defend their patents in U.S. courts or to enjoy the lucrative profits that come from tax dollars that pay for drugs for Medicare beneficiaries?

Lawmakers should also require inverted companies to pay the taxes they already owe on past profits they’ve already stashed offshore. In Pfizer’s case, the U.S. would receive a check for tens of billions of dollars once the Allergan merger is consummated.

Legal tax dodging is weakening our economy and leaving us all worse off.  Our nation only works for all of us when everyone plays by the same rules and every actor – citizen and corporation – pays their fair share. After all, these CEOs and their employees still live and work in America.  

Congress knows the prescription for change: change the rules to make inversion marriages unattractive and unprofitable.  If your congressional representative refuses to dispense this policy pill to Pfizer and other companies like it, then consider a political inversion and elect someone new.

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