How Parasite Corporations Like Pfizer are Chucking U.S. Citizenship to Escape from Taxes

AlterNet / By Lynn Stuart Parramore
May 11, 2014 |


Let’s say you’re a giant American corporation like Pfizer, founded in Brooklyn way back in 1849. The fact that you exist and make a profit is largely due to the generous support of U.S. taxpayers. It’s the taxpayers, after all, who pony up for the National Institutes of Health, which does the basic research you rely on to develop drugs on which you make gigantic sums. And it’s the taxpayers who shell out large amounts of money to protect your patents, broker trade treaties in your favor, and protect your interests around the world in international negotiations. The same ones who pay for the public education of your employees and the costly infrastructure—the highways, airports, etc.—needed to move your products. The very folks who pay the billions in federal contracts you receive.

So what do you do? Do you pay your share of taxes to return some of this largesse?

Oh, no. You vigorously lobby for lower taxes and leave no loophole unexploited. You are not satisfied to have received $2.2 billion in federal tax refunds from 2010-2012 while raking in $43 billion worldwide even though 40 percent of your sales are in America. You’re not ashamed in the least that in 2012, you stashed $73 billion in profits offshore on which you paid zilch in U.S. income taxes.

Your greed and irresponsibility demand still more. So you decide to get out of paying a single nickel to the country that feeds you. You rig up an overseas purchase so you can “officially” relocate to a place with a lower tax rate and in doing so deliver a giant middle finger to your fellow Americans.

Last week, New York-based drugmaker Pfizer finally admitted why it wants to buy British drugmaker AstraZeneca, which is based in London. Sure, it will get some experimental drugs out of the deal, but that’s not what it’s really after. What Pfizer wants is to cheat American taxpayers.
Ian Read, CEO Hall of Shame

Pfizer is willing to shell out $100 billion for AstraZeneca so it can get a new tax home and lower its tax rate from the roughly 27 percent it paid last year, to the UK tax rate, which is now 21 percent and will drop down to 20 percent in 2015.

Let’s pause for a moment to consider the CEO of Pfizer, Ian Read, who is orchestrating this move. According to Forbes , he is a poster boy for grossly overblown executive salaries, hauling in almost $19 million bucks last year. Read looted the company for this obscene amount of money, despite the fact that under his leadership, profits actually declined in 2013. So instead of trying to make money by doing productive things, like, for example, investing in research and development for new products, Read is looking for shortcuts that are less about doing anything useful for society and more about plain destroying it.

Fiduciary Duty to Cheat?

Right on cue, Read trotted out the predictable nonsense that he has a fiduciary responsibility to maximize value for Pfizer shareholders, and therefore must make the tax-dodging move.

Actually, that is baloney, as economist William Lazonick has repeatedly pointed out.

Shareholder value ideology is merely an absurdity that has been spread through American business schools since the go-go 1980s — a specious justification that allows executives to turn corporations into predatory extraction machines at the expense of stakeholders like workers and taxpayers. The fiduciary-duty-to-shareholders argument would be laughed out of court in nearly all circumstances (such as the exceptional case when a company is going to be sold). The reason for this is simple. Any idiot can figure out that sometimes a company must take short-term profit hits in order to do things that are in the long-term interest of the company.

Shareholder value ideology is only about boosting stock prices in the short-term, which often depends on moves that decrease the company’s value over the longer time horizon,as Lazonick has tirelessly pointed out. So Read is utterly full of it. But things have gotten so out of hand in corporate America that executives now actually believe, as hedge fund legend Jim Chanos has observed, that they have a fiduciary duty to cheat .

There was a time when an American CEO would not dare to officially state the kind of complete disregard for the public that Read is expressing. We shouldn't underestimate the importance of shaming such anti-social CEOs for daring to do so now. Social norms matter for things like executive compensation and the consideration of stakeholders rather than just shareholders (people who own stock). Read should be made to feel that there is nothing normal, or acceptable, about his twisted logic.

A Modest Proposal

Read said that Pfizer would keep its corporate headquarters in the U.S. (a very swanky affair on 42nd Street in Manhattan) and keep its listing on the New York Stock Exchange. Which essentially means that his company will still be located in the place where it will not be paying any taxes. Which would make Pfizer a giant, blood-sucking parasite.

Of course, part of the problem is that mega-companies in other industries, like Boeing, actually pay no taxes at all, and that makes the Pfizers very upset. If other multinationals get off scott-free, why can’t they?

H. David Rosenbloom, an attorney at Caplin & Drysdale in Washington and director of the international tax program at New York University's law school, explained his view of Pfizer’s plans to Bloomberg: "This is basically an opportunity to go outside the U.S. and still sell in the U.S. and strip the tax base…If we ever had a legislature in the United States, we could do something about this, but I don't expect to live that long."

Which brings us to the question of what can be done about this looting. Some Democrats, like Sen. Carl Levin, are making noises about curbing offshore tax moves in the wake of Pfizer’s announcement. Will anything happen? Doubtful. Passing any meaningful legislation on international tax policy, as Rosenbloom points out, is all but impossible in a deadlocked Congress.

Since countries around the world are basically in a race to the bottom to lower corporate tax rates, causing companies to shift their tax burden by pretending to set up shop in places like Ireland, Switzerland and Bermuda, it may be that trying to collect corporate taxes is going to be a futile exercise in the future. Perhaps a better way, as Thomas Piketty suggests in his recent book, Capital in the 21st Century, is simply to tax individual income and wealth. We could start with Ian Read ( and don’t tell me he’s Scottish)— he’s living in the U.S. and doing his business here, so he should be paying taxes.

Here’s another idea, just for the heck of it: How about if the citizens simply occupy Pfizer’s headquarters in New York? Let us not forget that in 2010, after receiving millions of tax breaks to create jobs in New York City, Pfizer turned around and pinkslipped hundreds of employees . If Pfizer doesn’t want to pay any taxes in the U.S., then let's reclaim all the stuff we paid for, and consider Pfizer headquarters to be stolen goods. The fancy artwork in the company gallery would fetch a nice price at auction, and the office space could rent at a premium. An effort to pay back companies like Pfizer in their own coin might remind them that they can’t simply go on looting indefinitely. At some point, the looters may get looted.

Corporations Should Have Labels So We Know What We're Getting

by Ralph Gomory on Sat, 05/05/2012 ~ The Economic Populist (The Huffington Post)

In a recent article we wrote:

America today is very different from the country that fought the Revolutionary War and framed the Constitution. Then, it was a nation of farmers; today, it's a nation of corporations.

Though we are today a nation of corporations, there is remarkably little discussion about corporate actions and the impact of those actions on our lives, even though it's clear that what our corporations, especially our major corporations, choose to do affects in major ways wages, jobs, healthcare and the overall economy.

There is even less discussion on what we want from our corporations. Is it, for example, enough that their sole goals are to maximize the return to their shareholders?

This article suggests something citizens can do to spur these needed discussions and to make visible what corporations are actually doing and the effects of their actions. Here we are not calling on the government to mandate this transparency, rather we are calling on ordinary citizens and citizen organizations to act to make the actions of corporations more visible, more transparent.

Labeling the Corporation
We are used to the idea that many of the products we buy are labeled. For example, many processed foods are obliged to disclose their ingredients, and they are labeled so that we do not have to guess at what we are eating. Consumers are often encouraged to read the label, so they will know what they are buying.

Similarly, let us now insist on labeling and making visible what corporations are doing. Corporations affect us and our country through their decisions on outsourcing and on wages and pensions, and by what their goals are. Do they consider in their actions the effects on customers, their own employees, the communities in which they operate, and on the country that sustains them with its laws? Or do they only consider shareholder value?

Do they pioneer with new and valuable products, and if they do, how do they decide where those products are made? Or, in the realm of services, do they exploit the ignorance of their customers to either give them loans they cannot repay or investment advice more tailored to corporate profits than to the welfare of the customers.

Let's label corporations with labels that tell us what they are actually doing.

How to Label the Corporation
We are not talking here about physical labels attached to products that corporations make, but about electronic labels attached to the corporations themselves.

But where would these labels come from? How would they be made? What would they look like? What would they do?

An example of corporate labeling already exists. It was created by a cooperative effort between the Zicklin Center for Business Ethics Research at The Wharton School of the University of Pennsylvania and the Center for Political Accountability (CPA). While this is a label that only describes the political spending activities of corporations, the methodology can be applied equally well to other corporate actions.

Together the two organizations developed a set of twenty-nine criteria by which the corporate approach to managing, overseeing and disclosing political expenditures could be judged. The criteria covered disclosure of the range of a company's political spending -- contributions to candidates, Party committees and ballot initiatives as well as payments to trade associations and other tax exempt entities organized for political purposes -- and its policies and practices for associated decision making and oversight.

They then scored the top 100 U.S. corporations on all twenty-nine criteria, and for each company the weighted scores for the individual criteria were combined into a single rating, specifically, the CPA-Zicklin Index of Corporate Political Accountability and Disclosure.

Before the Index was made public each company was informed of its rating and had the opportunity to dialog with CPA about them. This also gave the company the opportunity to make changes in the policies and practices they were publicly posting on their website. Only after that was the rating made public. The result is that you can see today this well thought out rating of the top 100 U.S. companies on the CPA website and also, for those who want it, a detailed d of how it was determined.

We believe that something very much like this can be done for other corporate activities.
The essential step is to work out criteria about which you want information, then see what information can be obtained for each company. It was important to the CPA-Zicklin effort, that a corporation not providing information to the public on a specific criterion would result in a score of zero on that criterion and thus a lower rating when the result is made public.

We suggest that civic organizations with a particular interest, label corporations on that interest., whether that is the environment, how they treat their employees, the quality of their goods, or the degree of outsourcing. They should then develop their criteria, and gather information; not always only from the corporations.. They should then produce a publicly available rating that is easy to link to.

Modern technology makes all this possible and more. People with a particular interest in a particular company could organize a Facebook page. There could also be Smartphone apps, similar to those that already exist for comparison shopping. Pointing the camera of a Smartphone at a product would immediately reveal the company that makes it and the rating given to that company by a selected website on a selected issue.

Any and all of these actions will contribute to making visible, transparent and discussible what our corporations are doing.

We are a nation of corporations, but our press and our conventional politics do not in any systematic way make visible the effect of corporate actions on the country. Let us as citizens make up for that significant omission.