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Mystic — U.S. Rep. Joe Courtney said today that pharmaceutical giant Pfizer Inc.’s proposed acquisition of rival AstraZeneca largely to take advantage of more favorable tax laws overseas has reopened the debate in Congress about tax reform.
Courtney, speaking at the Chamber of Commerce of Eastern Connecticut’s annual Congressional Update breakfast, said high corporate tax rates in the United States are “much higher than in other countries” and reform is needed. What some pundits don’t focus on, however, is that the top tax rate on individuals in these countries is much higher than in the United States, and that lowering corporate levies without raising other funds will leave the federal government with yet more budget shortfalls, he said.
“You can’t do that (lower corporate taxes) in isolation,” Courtney said this morning at Latitude 41 restaurant. “there has to be some kind of alignment in other parts of the tax code as well.”
Pfizer announced last month that it wanted to buy drugmaker AstraZeneca, an offer that climbed to $118 billion before the English company rejected a final bid last weekend.
Courtney, responding to a question posed by a Pfizer employee in Groton, said tax policy was a large consideration in the AstraZeneca bid and that the high U.S. corporate tax rate is creating a “tax inversion phenomenon” in which more American companies are talking about moving their headquarters overseas. Pfizer, he said, is only the biggest example of companies willing to go that route.
One proposal in Congress to reduce the number of inversions would require that an American company would have to transfer at least 50 percent of its shares to a foreign firm to avoid paying the U.S. corporate tax rate of 35 percent. Current rules allow companies to transfer as little as 20 percent to a foreign entity, which is what Pfizer had intended to do.
The 50 percent rule, Courtney said, would effectively end the practice of corporate inversions to save on taxes.