Democratic 2016 frontrunner Hillary Clinton slammed tax inversions Monday after it was announced pharmaceutical giants Pfizer and Allergan are merging, saying she will unveil proposals to prevent companies from using corporate loopholes to avoid higher tax rates.
“I urge Congress to act immediately to make sure the biggest corporations pay their fair share, and regulators also should look hard at stronger actions they can take to stop companies from shifting earnings overseas,” the former secretary of state said in a statement, accusing Pfizer of dodging taxes by moving its headquarters from the United States to Ireland after the merger.
But Americans for Tax Reform (ATR), a Washington-based think tank, says Clinton should blame the “greedy and counterproductive” tax code instead of corporations seeking lower tax rates.
“Inversion is a symptom, not a disease,” ATR preisident Grover Norquist says in a statement. “The disease is the United States’ punitive corporate rate and worldwide taxation system. The bottom line is that the driving force behind this merger is the greedy and counterproductive U.S. tax code.”
The U.S. currently has one of the highest nominal corporate tax rates in the first world, standing at 35 percent while Ireland’s stands at just 12.5 percent.
The $160 billion merger is projected to save Pfizer more than $2 billion over the course of three years.
Pfizer Chief Executive Officer Ian Read made it clear high taxes are largely responsible for the company’s decision.
“It’s not clear what Washington’s wishes are,” a source close to the transaction told the New York Times. “We tried to tell them to fix our tax system. It’s not like this is a surprise.”
ATR says companies need a globally competitive tax rate if the U.S. wants to keep them.
“If the Obama administration is serious about stopping inversions, as they claim, they should support tax reform that lowers our outdated 35 percent federal corporate income tax rate and ends the double taxation of income earned abroad,” Norquist says.