Pfizer/Allergan deal “inversion” deal catches the eye of US politicians

This week’s announcement of the USD 160bn deal between Pfizer and Allegan is the largest example to date of a deal that is in effect a corporate tax inversion. The deal has already attracted criticism from politicians in the US, most notably Hilary Clinton, who has accused Pfizer of “avoiding its fair share of taxes”. Essentially the practice of relocating a company’s legal domicile to a lower-tax nation is not new. There have been a number of deals over the last few years where the structure of the deal is such that the new entity formed has ultimately ended up being registered in a much lower tax location like Ireland or Canada. Previous high profile tax inversion deals that have gone ahead include the USD 60bn Medtronic deal completed in January this year, last year’s USD 10.8bn Burger King/Tim Hortons deal and 2013’s USD 24bn Liberty Global deal.

It would take changes in the US tax law to stop such deals from happening, but given that this is an issue that both Republicans and Democrats in the US appear to agree on it is not unfeasible to think that this may well become a subject that one or both of the parties try to include as part of their 2016 campaign pitches!