US politicians condemned Pfizer's deal with Allergan as a tax dodge on Monday (23 November), bringing another round of hand-wringing in Washington over the corporate tax code, though legislative action before 2017 is unlikely.
Democrats heaped the most criticism on the New York-based drug maker, with Hillary Clinton accusing Pfizer of using legal loopholes to avoid its "fair share" of taxes in a deal that she said "will leave US taxpayers holding the bag". The front runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details.
"I have a long list of what we're going to go after, because I'm sick and tired of what we've just seen with this giant pharmaceutical merger, where these companies are leaving America to cut their taxes, when they should be staying here and investing in the people and the opportunities that will build our economy," said the ex-US secretary of state and former New York senator in a statement.
"Washington is gridlocked," said Republican front runner Donald Trump, who has called for a corporate tax overhaul. "I'll solve that so fast... We're not going to let Pfizer leave. We're going to talk to Pfizer. They're going to stay," said Trump.
Pfizer is doing the largest inversion deal of all time. In a $160bn (£106bn) transaction, it plans to move its tax address from the US to Ireland, if only on paper, by buying and merging into Allergan, a smaller, Dublin-based competitor. The combined company will be called Pfizer PLC and will be run by Pfizer's CEO, with executive management staying in New York and extensive operations across the US, but it will no longer be taxed as a US company.
Pfizer holds about $74bn in profits offshore that, thanks to another loophole, it has not brought into the United States to avoid paying the taxes due under America's worldwide corporate tax system. As an Irish-domiciled company, it will have less costly access to those funds.