No one seems to like tax inversions, those deals whereby a U.S. corporation merges into a company in a tax haven to cut its U.S. tax bill, even though many—or most—of its operations remain in the U.S.
President Obama wanted to ban tax inversions in his 2015 budget, Hillary Clinton opposes inversions, and Donald Trump has said that such deals are another reason to overhaul the tax code.
So why does Pfizer seem to think that it can structure a merger with Allergan in a way that would allow Pfizer to be “bought” by its partner and move its headquarters to Allergan’s base of Ireland, one of the world’s great low-tax jurisdictions. The U.S. pharmaceutical giant failed once before, after all, when it attempted a tax inversion with the U.K. firm AstraZeneca earlier this year.
One possible reason is money. Pfizer was the thirtieth largest lobbyist on Capitol Hill in 2014—out of over 3,500 companies—spending $9.5 million in 2014 and $6.2 million so far this year. Taxes was the second most common issue pressed by Pfizer’s 84 lobbyists in the 2013-2014 period, according to the Center for Responsive Politics. And it appears, from information collected by the Center, that Pfizer has lobbied hard against the Stop Corporate Inversions Act of 2014, a bill before both the House and the Senate.
Apart from donations to individual candidates (more below) and spending by lobbyists on congressional committees, it is difficult to see where Pfizer’s political spending is going. For example, Pfizer (PFE) is likely a major donor to the Pharmaceutical Research and Manufacturers of America (PhRMA), a fierce opponent of the Stop Corporate Inversions Act. But no specific donations to trade associations and other organizations like the Chamber of Commerce, of which Pfizer is a prominent member, are disclosed. Bruce Freed from the Center for Political Accountability told Fortune, “Many companies use the Chamber as a cover for tax issues and shaping tax policy to benefit them.”
Ken W. Cole, Pfizer’s senior vice president for government relations, would not comment on Pfizer’s lack of disclosure of donations to think tanks and trade associations, nor would he indicate which organizations were in receipt of such donations.
However, a researcher at the Edmond J. Safra Center for Ethics at Harvard University, Brooke Williams, uncovered that Pfizer, among other companies like General Motors and ExxonMobil, had given between $10,000 and $25,000 to the National Bureau of Economic Research. It is difficult to nail down how NBER views tax inversions, though an NBER paper from 2002 gave intellectual cover to tax inversions by suggesting that tax evasion was not the primary impulse behind U.S. companies seeking to incorporate overseas.
It is easier to see which politicians Pfizer contributes to, however. Again, based on figures compiled by the Center for Responsive Politics from congressional disclosures, the three biggest recipients of Pfizer funding in 2014, the latest year for which complete figures are available, were Joseph Crowley (D-NY), Corey Booker (D-NJ), and outgoing Speaker John Boehner (R-OH). Contributions continued in 2015, according to Pfizer’s own latest report from the first half of 2015. Incidentally, Allergan (AGN) was also a top donor to Boehner in 2014.
Crowley sits on the powerful House Committee on Ways and Means, the second largest target of lobbying money from Pfizer in 2014. None of the bills Crowley sponsored or co-sponsored in 2014 were related to corporate taxes, and back in 2007 Crowley said of tax inversion, “I will continue to work to end this practice that effectively results in corporate tax evasion.”
Still, he has done little to stop that practice in the last eight years. And although his Democratic colleague on the Ways and Means committee Sander Levin (D-MI) is the sponsor of the Stop Corporate Inversions Act, Crowley is not a co-sponsor.
Second in line behind Crowley was Senator Booker. Like Crowley, none of the bills he sponsored or co-sponsored in 2014 were related to corporate taxes. But Booker sits on the Senate Commerce Science and Transportation Committee, another big target for Pfizer’s lobbying dollars.
In remarks he made at a PhRMA annual meeting in Washington, DC in 2014, Booker said that under the current tax structure, American businesses were being forced to compete “with one arm tied behind their back” because of higher domestic taxes. It’s difficult to tell exactly where he stands on the inversion issue, but, again, Booker is not among the co-sponsors of the Senate version of the Stop Corporate Inversions Act.
Pfizer’s political spending is anything but an open book. And the pharmaceutical giant has plenty of company on that front.