Groups say Pfizer trying to dodge $35B in taxes

Inversion deal with Ireland-based Allergan ‘squeezes’ families

U.S. pharmaceutical giant Pfizer is trying to dodge some $35 billion in taxes by merging with Ireland-based rival Allergan and shifting its headquarters overseas, a coalition of labor and consumer groups charged Thursday.

Americans for Tax Fairness said the maker of Lipitor, Viagra and other popular drugs would take advantage of Ireland’s lower tax rates while reaping the benefits of being based in the U.S. under a $160 billion corporate tax inversion deal announced with Allergan in November.

Regulators are reviewing the transaction even as the Obama administration has tried to block such deals on grounds that they could undercut the U.S. tax base.

Pfizer is pursuing the Allergan deal in the wake of raising the prices of dozens of prescription drugs by at least 10 times the rate of inflation since 2012, the coalition said. The group’s members include the AFL-CIO, the American Federation of Teachers and other labor unions, as well as consumer watchdogs such as the Public Citizen’s Congress Watch.

“By dodging taxes while boosting prescription drug prices, Pfizer squeezes American families and communities from two sides,” said Frank Clemente, executive director of the coalition.

In a statement, Pfizer responded that the Allergan deal would “create a global, R&D-focused company with the ability to lead in the quest to find cures and treatments for patients with the most feared diseases and conditions of our time.”

It added that the merger “is not structured to move jobs out of the United States, where we conduct the majority of our research.”

The coalition report said Pfizer appeared to be overstating its U.S. tax rate on worldwide income, which was reported as 25.5% in 2014. The report also said that:

Pfizer’s effective 2014 tax rate was an estimated 7.5%, and the company averaged an effective rate of 6.4% from 2010 to 2014. The discrepancy results from large provisions that Pfizer includes in its filings for U.S. taxes that won’t be paid unless the company transfers funds from its overseas units back to the U.S.

The drug maker had up to $148 billion in profits held overseas, untaxed by the U.S., at the end of 2014.

Pfizer reported losing more than $16 billion in the U.S. from 2010 through 2014, while it earned $78 billion overseas. The discrepancy likely resulted from profit-shifting to foreign tax havens because Pfizer had 38% of its sales and 48% of its assets in the U.S. in 2014, the report said.

Pfizer shares closed 1.9% higher at $30.59.