Another big Obama win: Regulation to end "global tax avoidance" by corporate "inversion"

Corporations have smart lawyers to figure out loopholes in the law that allow them to legally save money by avoiding taxes.   This is one of the behind the scenes scandals that has turned our country into an oligarchy, a government "of the corporations, by the corporations, and for the corporations."

The pharmaceutical giant Pfizer was just about to take advantage of one of these loopholes called an "inversion" deal, whereby a U. S. corporation merges with another corporation in a foreign country that has a more favorable corporate tax structure.   Then the headquarters of the merged companies establish that country as its headquarters, thereby avoiding U.S. taxes.

Pfizer was all set to carry out the biggest-ever merger inversion deal, worth $160 billion, in merging with the Ireland-based Allergan PLC.  The merged company would then officially be registered -- and pay taxes -- in Ireland at their lower rate.

Such a transfer is legal.   And it's killing our country.   All the tax revenue not paid by corporations has to come from somewhere, so individual taxpayers wind up footing the bill.

President Obama's Treasury Department just announced its new regulation on Monday that would eliminate much of the tax advantage -- and within 24 hours, Pfizer announced that the merger deal was off the table.  This is the clearest evidence yet that the inversion is merely a ruse to get away with not paying U.S. taxes.

Just to give an idea of what a trail of manipulation this whole scheme involves, here's how Forbes outlined the history of this line of corporate inversions:

  1.  Pfizer would merge with the much smaller Allergan, maker of Botox, which is headquartered in Dublin, Ireland.  Technically, Allergan is buying Pfizer, although Pfizer is much larger, in fact the largest pharmaceutical company in the U.S.   But now it would be an Irish company headquartered, for tax purposes, in Ireland.

   2.  However, until last year, the company called Allergan had been based in California and paid taxes there.   Then it was bought by Actavis, an Ireland-based company for $66 billion.

   3.  But wait!   Actavis itself came into being through a quick succession of deals in 2012, when a New Jersey drugmaker, Watson Pharmaceuticals, bought Actavis, then a Swiss company, for $6.5 billion -- and moved its headquarters and tax home to Ireland.

Forbes concludes:  "Essentially, all these deals were funded partly by U.S. taxpayers, as each company that was bought reduced its U.S. tax rate, creating a series of larger, and larger companies."

There ought to be a law against this sort of thing.   President Obama wishes there were such a law, but congress will not act to pass such a law.   Still, there are things he can do through his regulatory power in the Treasury Department to stop them from getting a tax break when they move to an offshore location simply to reduce their U.S. tax burden, which in the case of Pfizer would have been $35 billion.

President Obama just saved the America taxpayers $35 billion.   That's an accomplishment.   But somehow, the Republicans will find a way to denounce him for it.

Ralph