Collapse of Pfizer-Allergan deal sends shockwaves through the US – such is the leading article for today’s (7 April 2016) Financial Times.

inversion[1]It might have sent shockwaves through the financial world, but what effect did it have on the world of the ordinary taxpayer? My guess is that he/she hasn’t the faintest idea what was at stake but if they did they’d be madder than ever.

You see, this proposed deal between Pfizer and Allergan was not just another corporate merger. It was ‘an inversion’ such that if it had gone through, Pfizer would have in effect ‘expatriated’ ( now owned by an Irish parent corporation).As the result, it’s estimated that Pfizer would have saved as much as $35 billion in US taxes. Given that the Republicans, in their internal budget negotiations, claim that $30 billion in deficit-reduction is required for the coming fiscal year, this failed ‘inversion’ seems all the more interesting.

According to the Financial Times, Pfizer’s board voted to abort the blockbuster deal after the US Treasury unveiled proposals that appeared designed to squash the lucrative benefits anticipated on the deal.

I’m not quite sure where this leaves Pfizer with more than $128 bn of profits stored abroad. But if they do bring that money back to the US (where it might be rather useful for Americans to have it invested) they will have a whopping big US tax bill.

What happens next, no one knows – but one thing is for sure – if taxpayers understood a bit more about the high stakes involved between corporations and the  health of the American economy – as well as how various politicians are involved –  they might vote differently in the upcoming election.

 

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