The current juggernaut of corporate inversions is Pfizer’s planned “merger” with Allergan in a $160 billion blockbuster deal. In case you’re not following this mind-boggling story, here’s the plot line in a nutshell.
- Allergan is a drug company based in New Jersey. Some time ago, even though it was formed in the United States and continued to operate precisely as it had before, it “merged” with a company in Ireland by the simple process of filing a few papers and a change of address. Poof! Allergan was no longer an American company.
- Pfizer now proposes to merge with Allergan the result of which will be a single Irish company and the disappearance of billions of potential tax dollars from the U.S. Treasury. A deficit you and I get to make up. Sweet deal, eh?
This “Irish” company operates almost entirely in the United States but it pays little to no U.S. corporate tax. Translation: it can take full advantage of American infrastructure, academia, research, local and state tax breaks, and thousands of other benefits of being a U.S. corporation while contributing essentially not one dime to the cost of those benefits.
If I run a wire from my house to your cable connection and pirate the signal, that’s illegal. I’m benefiting without paying. Thievery, pure and simple.
The same is undeniably true of American corporations which undertake inversions of this heinous and disgusting type.
The problem has two dimensions at least:
First, the U.S. corporate tax code has a massive loophole. Many members of Congress have been working for years to close this one to no avail, thanks to these corporations — who are now, by choice, foreign companies, remember — buying influence in our national Legislature. (An act which ought to be illegal but is also loopholed in place.)
Second, it has always been seen that it is in America’s interest to encourage foreign businesses to set up operations and do business in this country. But the immoral and greedy American corporate culture has twisted this benefit into a huge detriment to this country.
Some estimates are than these inversions cost the American economy upwards of $600 billion per year in tax revenue across all levels of government. That number could well be low by orders of magnitude. We can’t know because one of the advantages these inverted companies get is the right not to disclose much financial detail. (See “encouraging foreign business”.)
This is a travesty. It must be stopped. This single argument alone is enough to justify a significant increase in the regulation of capitalism before it literally destroys our nation.