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A Pfizer Deal With Allergan Would Add Fuel to the Fight Over Taxes

Pfizer And AstraZeneca's Billion Dollar BattlePfizer And AstraZeneca's Billion Dollar Battle

A Pfizer deal to buy Botox-maker Allergan and move its tax domicile to Dublin, which could come as early as Monday, will throw new fuel on an intensifying debate over the U.S. corporate tax system.

The deal would be the largest ever in the drug industry, valuing Botox-maker Allergan (ACT) at around $150 billion. Because Allergan is based in Dublin, Pfizer (PFE) could do a so-called inversion, moving its legal domicile to reduce taxes—following in the footsteps of Burger King, Medtronic, and Mylan, which all inverted last year.

The Treasury is trying to stop the move, sending a letter to Congress saying it plans to issue new guidance later this week designed to cut tax benefits for companies that invert. It is unclear what effect that guidance may have on the Pfizer deal. The Treasury has said it can’t stop inversions without congressional action.

Republican candidates for President have proposed reducing the corporate tax rate, which at 39% is the highest in the world and driving the inversion trend. But Democrat Elizabeth Warren gave a speech yesterday attacking that argument, saying the tax code is filled with special breaks for corporations that make “the average effective tax rate for corporations is about the same” as in other developed countries.