President Barack Obama scored a victory Wednesday when Pfizer scrapped a $160 billion overseas deal that would have kept a chunk of the drugmaker’s profits beyond the U.S. tax man’s reach.
But recent, aggressive federal actions that discouraged Pfizer Inc.’s combination with another drugmaker, Allergan PLC, won’t stop all so-called inversions, or deals that end with a company relocating to another country — at least on paper — and trimming its U.S. tax bill in the process.
Experts say these deals, which have come under criticism from politicians, will remain attractive to some companies until the U.S. pursues a massive tax law overhaul.
“There may be a temporary respite from inversions, but the large financial benefits … are still there,” said Bret Wells, a tax lawyer and law professor at the University of Houston.
Even the Obama administration, which has taken several steps to discourage inversions in recent years, says Congress ultimately must step into this fight.
This week, the Treasury Department announced a third round of regulations designed to limit the practice and make it less lucrative for companies.
These rules will make it harder for U.S. companies to find a foreign deal partner, said Donald Goldman, a professor at Arizona State University’s W.P. Carey School of Business. He added that the regulations “will definitely have a chilling effect on inversions.”
They actually will come close to killing the practice, said Robert Willens, president of a New York-based tax and accounting service and a former Lehman Brothers managing director.
