Pfizer chief lashes out at US crackdown on Allergan deal

Pfizer chief executive Ian Read has hit back at the US government over its fatal blow against the company's plan to merge with Dublin-based rival Allergan.

Pfizer and Allergan called off a $160 billion (€140m) merger deal earlier this week after the Obama Administration introduced emergency regulations designed to block such transactions.

The deal, known as a corporate inversion, would have seen Pfizer relocate its domicile to Ireland in a move that would have sharply reduced its tax liability.

“This week’s Treasury action interprets the [US] tax laws in ways never done before,” Mr Read said in an opinion piece written for the Wall Street Journal. “This ad hoc and arbitrary attempt to single out and damage the growth opportunities of companies operating within the current law is unprecedented, unproductive and harmful to the US economy.

Mr Read said the Treasury action “was accompanied by much unfortunate rhetoric about tax avoidance”.

“No one was shirking their US tax bills,” the Pfizer chief said in the piece which appeared Thursday. “In a merger with Allergan ... we would have continued to pay all federal, state and local taxes on our US income.”

More foreign acquisitions

He said the new rules would only create a “ permanent competitive advantage for foreign acquirers. Simply put, there will be more foreign acquisitions of US companies resulting in fewer jobs for American workers.”

In his Wall Street Journal article, Mr Read, who is also chairman of the pharma giant said companies such as Pfizer and Allergan contributed to the communities in which they operate.

“To be pilloried as ‘deserters’ when we are trying to stay competitive on a global stage so that we can continue to invest in the US is wrongheaded,” he said, adding that US government policy should encourage investment certainty and job creation.

“The US tax code has among the highest rates in the Western world and forces its multinationals to pay US tax on income earned abroad if they want to bring it back to this country.

“The real-world consequences are significant. In Cambridge, Massachusetts, where Pfizer has a state-of-the-art research lab, we are surrounded by foreign-owned competitors’ facilities. When those companies invest in their facilities, it is often as much as 25-30 per cent cheaper than every dollar we put into research and jobs. Why? Because our competitors don’t have to pay the penalty imposed on US corporations bringing earnings back to America.

“We can invest less because of a broken tax system,” he stated.

Global marketplace

He agreed that Pfizer benefited from doing business in the US but noted that its competitors benefit also, “and they pay significantly less for the privilege. So we compete in a global marketplace at a real disadvantage”.

Mr Read said his company had worked for a long time “with Congress” to reform the US system of business taxes. He said it was only in the absence of any reform that the company had proposed a merger with Allergan which, he said, was driven by “strong commercial and industrial logic” and which would have made it easier for the company to invest further in the US.

“While the Treasury’s proposal is a shot at Pfizer and Allergan, this unilateral action will hurt other companies as well,” said Mr Read in the piece which appeared a day after the two companies abandoned the merger plan.

“If the rules can be changed arbitrarily and applied retroactively, how can any US company engage in the long-term investment planning necessary to compete? The new ‘rules’ show that there are no set rules. Political dogma is the only rule.”