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May 7, 2014
Pfizer-AZ: Politics and Press Releases
This saga is going to be running for a while; we might as well all resign ourselves to it. The latest seems to be that the British government is getting more visibly into the act. The Business Secretary, Vince Cable, has said that he's not going to let Pfizer use the UK as a tax haven. But why did the country's corporate tax laws change so favorably if they didn't want companies to use the place as a tax haven? Instead of this being a statement against the deal, I take this one as mere public relations. He has also promised to protect jobs in the country, and there the government has some leverage (since they're the ones who set those tax rates, and can set them again should they choose).
At the Prime Minister level, David Cameron has said that he's seeking more assurances from Pfizer. As Monday's post said, though, any new PfizerAstraZeneca, which would actually use the new name "Pfizer", as has been the custom, can make these promises by slashing jobs in the US and and Sweden. You'll note that the Swedish government is getting no assurances from Pfizer at all. They have no leverage, as far as I know: Sweden's corporate tax rate is 22% as opposed to the UK's 20%, and I believe that other costs are higher as well. If Pfizer repatriated its foreign earnings to the US, they'd pay even more (here's an excellent look at the company's complex tax situation, and its analysis fits the company's current moves perfectly:
Pfizer needs cash to pay dividends, pay down debt incurred for the Wyeth acquisition, buy back shares, and perhaps acquire more U.S. companies. At the same time, it is under pressure to shore up its after-tax earnings as patents on profitable drugs expire faster than they can be replaced. If there was ever a company that could use another tax holiday -- or generous transition rules to a territorial system -- Pfizer is it.
All of the talk from Pfizer's management about R&D this and synergy that is window dressing. It's taxes. Depressingly, this fits my oft-stated rule that most questions that are phrased in the form "I wonder how come they. . .?" turn out to be answered with the word "money". If you'd like to experience some of that managerial window dressing first hand, though, take yourself to PfizerUpdate.com, where the company has set up a handy web portal for all its press releases on the subject. You can even have them email you when a new one is posted. Or you can just bang yourself on the head with a hammer every so often, and eliminate the middleman. Your call.
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