Seamus Coffey: No State tax windfall in Pfizer deal

Pfizer’s likely tax inversion into Ireland is unlikely to boost the country’s coffers through higher corporation tax receipts, according to a leading economist.

The US pharmaceutical company has agreed an $160bn (€150.05bn) takeover of Dublin-headquartered botox maker Allergan, which will see it move its headquarters to Ireland to avail of lower corporation tax rates in this jurisdiction.

Some commentary has suggested the State’s tax receipts could receive a multi-million euro boost as a result of Pfizer’s global profits being channelled through Ireland but UCC economics lecturer Seamus Coffey believes the deal will have little impact here.

“Pfizer and Allergan have substantial operations in Ireland and they’re likely to be largely unaffected,” said Mr Coffey.

However attractive an inversion is, pickings are slim for the big companies https://t.co/ZTczYB4prV pic.twitter.com/EraRxGAC8f

— Bloomberg (@business) November 24, 2015

“When Pfizer move their international profits to Ireland they won’t pay any additional tax.”

Pfizer pays the prevailing tax rate in each country in which it operates and pays additional tax in the US on its aggregated global profits, according to Mr Coffey.

As the US rate of 35% is the highest in the OECD, the company pays additional tax to the US government to bring the overall tax on profits up to the US rate.

By moving its global headquarters to Ireland, Pfizer will not have to pay any additional tax, however, as the rate in each individual country will likely be greater than Ireland’s 12.5%.