Investment banker who advised on collapsed Pfizer-Allergan merger defends “misunderstood” inversion deals
An investment banker who advised Pfizer on its collapsed $160bn (£110bn) merger with Allergan has spoken out in defence of tax inversion deals, describing them as “misunderstood”.
Guggenheim Partners chairman Alan Schwartz has also told how intensifying regulatory scrutiny is contributing to a slowdown in mergers and acquisitions (M&A) activity.
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“While a lot of activity is being discussed, it’s a little harder to get transactions across the finish line,” he told Bloomberg in an interview.
The Pfizer-Allergan deal, which would have been the biggest healthcare merger in history, broke down last month after the US Treasury Department cracked down on inversion deals, where companies relocate their headquarters to countries with more favourable corporation tax systems.
Schwartz described it as “one of those things that's the most misunderstood about tax policy”.
Read more: Another big deal breaks down after intervention from US authorities
He said: “The United States is the only country in the OECD – the only one of the developed world countries – that taxes not only what you earn in the United States if you're a United States taxpayer, but it taxes everything you earn in the rest of the world if you bring the resources home."
“Now, in certain industries that puts you at a very big competitive disadvantage to countries who have all their headquarters here, have a lot of operations here and can invest the money that they earn overseas back into the United States where a US-domiciled taxpayer cannot.”
He added: “So companies doing inversions are not avoiding paying US taxes at all. They're going to still pay US taxes and then they're going to have the opportunity to invest more of their foreign earnings back into the United States.”