American drug company Pfizer is preparing to “move” to Europe in an attempt to avoid high U.S. taxes.
Following news of the plan the Obama administration said it wants to stop the move, but is powerless if Congress doesn’t take action.
Pfizer is currently in talks with Irish drugmaker Allergan as part of a $150 billion acquisition. The second largest acquisition of all-time would allow Pfizer to move its headquarters to Ireland. It would also mark the second-largest acquisition of all time.
Allergan, the maker of Botox, would allow Pfizer to pay far less in taxes than the company currently pays in the United States.
The acquisition would value Allergan up to $380 per share, that’s a substantial increase over its $300 price from a week ago. The premium shows how valuable ditching the U.S. tax system would be for Pfizer and it highlights a growing problem for U.S. regulators.
The Treasury Department unveiled new rules Thursday to make it harder for companies to avoid some American taxes by doing these deals.
“It’s Treasury’s responsibility to protect the U.S. tax base,” said Treasury Secretary Jack Lew, while acknowledging that the White House can’t do much without Congressional support.
Last year, Pfizer aggressively pursued the acquisition of British pharmaceuticals rival AstraZeneca. The company had hoped at that time to move out of the country. The deal was never finalized. Pfizer officials were very open with exactly why they wanted to purchase a company outside of the United States.
A U.S. company can legally move its headquarters to another country if at least 20% of the combined company is owned by foreign shareholders.
In the meantime, if Congress doesn’t act quickly, another U.S. company will soon be avoiding much of its U.S. taxes.