Pfizer CEO Slams U.S. Tax Code, Says Breakup Still in the Works
February 11, 2015
By Alex Keown, BioSpace.com Breaking News Staff
Pfizer Inc. CEO Ian Read believes the U.S Tax Code is putting all American companies at a disadvantage.
Speaking before the BIO CEO conference on Tuesday, Read touted the quality of scientists in the United States, but said there is no competitive advantage against foreign companies due to the high corporate tax rate in America, in-Pharma Technologist reported.
The U.S. federal corporate tax rate is 35 percent with an average of 4.1 percent added by states, makes the rates the highest in the world. Loopholes in the law can lower some of the rates for companies.
The high tax rate in the U.S. also creates an uneven playing field when it comes to acquiring other companies, Read said in the interview. He said the high tax rate prevents Pfizer from having the available finances to offer large enough bids to acquire other biotech and pharmaceutical companies. Last year Pfizer attempted to acquire British pharmaceutical giant AstraZeneca PLC and relocate its headquarters there, which would have reduced the company’s tax burdens.
Pfizer reports paying an effective rate as high as 27.5 percent recently and in Britain would pay no more than 20 percent, about one billion dollars in savings annually. However, AstraZeneca rejected the offer based on a number of factors, but one being AstraZeneca officials felt the $118 billion offer was too low. Read speculated a lot of smaller biotech firms do not rate Pfizer highly because the company does not offer large enough bids when attempting to acquire other companies.
Additionally, U.S. corporations are taxed on monies made overseas when those funds are brought back into the United States. Because of that many American companies are keeping money offshore. A March 2014 Bloomberg analysis showed U.S. companies are now holding about $2 trillion abroad. Pfizer has kept about $40 billion offshore, according to a CNBC report.
Read did not rule out other possible bids to merge with a foreign company and relocate to take advantage of more friendly tax rates. But, he noted the federal government is taking steps to make such moves more difficult.
While Pfizer failed to acquire AstraZeneca, last week Pfizer entered into merger agreements with Illinois-based Hospira for $17 billion. Despite the acquisition, Read said Pfizer is still exploring the idea of breaking the company up into smaller entities, which would have a one-time cost of about $400 million. Read said officials need to determine if the smaller entities would be sustainable as independent entities and “maximize shareholder value.”
Read also criticized the public’s general lack of knowledge of the way biotech companies operate, particularly the time and money spent on research.
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