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Will Pfizer and AstraZeneca Merge?

12:00 AM, May 17, 2014 • By IRWIN M. STELZER
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Walgreens, the drug chain, is considering structuring its acquisition of Alliance Boots to enable it to reincorporate in Switzerland, where Boots is based, before legislation is passed to bar the way. But legislation, if any, would most likely be part of an over-all reform of the American tax system. And that won’t happen until after the 2016 presidential elections, if then. 

Meanwhile, most congressmen are not concerned. They know there is a huge difference between the de jure 35 percent corporate tax rate, allegedly inducing flight to more benign jurisdictions, and the lower de facto effective rate, paid after all the breaks built into the tax code with the help of lobbyists are taken into account. As for the $2 trillion in American corporate cash supposedly trapped overseas to avoid taxation on repatriated earnings, it is not really needed by most companies here. Few are holding back investments for lack of cash, and most can borrow at derisory interest rates should they need cash. 

Result: lay-offs by pharmaceuticals will continue whatever happens, there will be more inversions in several industries, but most corporations have complex reasons for choosing a home, and taxes are only one of them. The U.S. tax base will not be “hollowed out” by inversions. That job will be left to congressmen and the president, as they pile tax upon tax. 

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