Democratic Presidential hopeful and U.S. Senator Bernie Sanders has urged the Treasury to block Pfizer’s planned corporate inversion.
Sanders, ranking member on the Senate Budget Committee, said in a
He cited a recent
“The Pfizer-Allergan merger, which has not yet been finalized, is structured to result in a company that is technically based in Ireland for tax purposes. This is nothing less than a tax scam,” he wrote. “The allegedly newly formed Irish company would continue to be managed from its headquarters in the U.S. and 56 percent of the company would still be owned by Pfizer’s shareholders.”
Sanders said that until Congress passes legislation that would tax such a corporation as a U.S. corporation, Treasury has the authority under existing law to block some of the tax dodging techniques that are available to corporations after they invert. Two of these techniques, “hopscotch” loans and earnings stripping, could be tightened or blocked using existing law, according to Sanders.
The hopscotch loan allows an inverted company to loan to the foreign parent rather than the U.S. parent, thereby letting them move offshore profits to U.S. shareholders. Earnings stripping involves an inter-company loan from the foreign company to the U.S. entity with the U.S. entity making debt payments which are deductible and which reduce U.S. taxable income.
“Large multinational corporations should not be able to avoid paying U.S. taxes when children in America go hungry,” Sanders concluded. “We must demand that these profitable corporations pay their fair share in taxes.”
