How to Stop Turning U.S. Corporations Into Tax ExilesDecember 14, 2015
THE Pfizer-Allergan deal is a travesty. Pfizer, which is based in New York, will move overseas by merging with Allergan, based in Ireland, in a maneuver known as a corporate inversion. The point isn’t to find corporate synergy. It is to leave behind our uncompetitive international tax system.
Not only is this the largest inversion in history, but it will also open the floodgates for other companies to leave the United States, further eroding our tax base, damaging our economy and costing many thousands of jobs.
This is not just me speculating. I have spoken to many chief executives who confirm they are planning to follow Pfizer’s lead. But while this inversion has set off a firestorm of public statements by our leading presidential candidates and other politicians, Congress continues to do nothing.
Recently, Hillary Clinton came out against this mechanism and proposed slowing the pace of future inversions by tightening regulation and imposing an exit tax on companies leaving. While I applaud her for speaking out publicly, her proposal is flawed because it fails to fix the underlying problem: Our international tax code is disadvantageous to companies based in the United States, as most countries now employ a territorial tax system, which allows companies to pay taxes only where the money is earned. More important, we can’t afford to wait more than a year for the election of a new president to take action, as we will lose many more companies in the interim.