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The U.S. drug maker Pfizer has offered more than $100 billion to acquire its London-based rival, AstraZeneca. Pfizer says it likes AstraZeneca's strong pipeline of new drugs. But the American company also makes clear it's pursuing the British firm because it wants to lower its tax rate. And all Pfizer has to do is buy the company and move its headquarters to London. NPR's Yuki Noguchi reports U.S. companies are increasingly looking abroad to lower their tax bills.

YUKI NOGUCHI, BYLINE: For companies, home isn't necessarily where the heart is or even where it does most of its business. Sometimes, it's where corporate taxes are lowest. And it used to be easier for companies to keep their legal bases in out-of-the-way places like Bermuda. It's a practice known as tax inversion and it was popular until 2004, when Congress changed the law. Now, companies whose ownership is 80 percent based in the U.S. are subject to U.S. taxes. But tax inversion is coming back in a new form. In the last year, Chiquita, of banana fame, Liberty Global, the media giant, and drug company Perrigo all announced deals to buy foreign companies and shift their headquarters. In each case, it lowered their tax burdens.

MICHAEL KIRSCH: So, it's something that is kind of back as a hot thing for at least some companies to do.

NOGUCHI: Michael Kirsch is a former international tax counsel for the U.S. Treasury and a law professor at Notre Dame.

KIRSCH: It's in order to get around the restrictions on that 2004 law that the recent trend of inversions involve mergers of a U.S. company with an existing foreign company.

NOGUCHI: Because a merger often means the combined firm fall below the 80 percent domestic-ownership threshold. Kirsch says after the merger, operationally, things don't change much. Executives and personnel of the U.S. company often stay in the U.S. One of the few downsides, Kirsch says, is public relations. A decade ago, Stanley, the tool maker, abandoned a tax inversion plan in part because of backlash.

KIRSCH: This was a company that appeals to, you know, kind of working people in the U.S. and it sells tools and such. I think they had more sensitivity to that potential reputational risk.

NOGUCHI: And AstraZeneca CEO Pascal Soriot echoed that concern today. He testified before a British Parliamentary committee detailing his objections to the Pfizer proposal.

PASCAL SORIOT: We are afraid could generate a substantial controversy and potentially delay this merger and potentially impact the reputation of our company as well.

NOGUCHI: Steve Wamhoff is legislative director for Citizens for Tax Justice, a public advocacy group. He says that should be a concern for Pfizer.

STEVE WAMHOFF: These corporations are American corporations in every sense of the word. They're doing most of their business in the United States. They're benefitting from the public investments that we all pay for.

NOGUCHI: Wamhoff is pinning hopes on promises by Michigan Senator Carl Levin and others to crack down on tax avoidance.

WAMHOFF: Pfizer is going to, just by moving some paper around, pretend to be a foreign company and get out of paying their U.S. taxes and that's absolutely wrong. This hopefully is the sort of thing that will be a catalyst for Congressional action.

NOGUCHI: For Barbara Ryan, the managing director of FTI Consulting, it's more about the need for tax reform and U.S. tax rates being too high.

BARBARA RYAN: We live in a global world and we need to have a tax policy that is more consistent with tax rates outside.

NOGUCHI: She says once one company does it, the pressure is on for others to follow.

RYAN: So, I think there's sort of a foot race to maintain competitiveness. The companies that have done it have an advantage over the companies that haven't yet done it.

NOGUCHI: Though, she says, she expects to see the trend accelerate. Yuki Noguchi, NPR News, Washington.

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