The U.S. Treasury Department has increasingly targeted such strategies, most recently announcing new guidance on how it will value assets owned by U.S. companies that undertake inversions. The U.S. has the highest tax rate for businesses in the world, at 35 percent, and is one of the only countries to tax corporate profits wherever they are earned. Previous moves by the U.S. Treasury have derailed other proposed inversions, including AbbVie Inc.’s plan to buy Ireland’s Shire Plc for an estimated $52 billion. Pfizer and Allergan’s deal appears structured to avoid the tax inversion rules.

Read has already reached out to lawmakers in both houses of Congress, including Senate Majority Leader Mitch McConnell, and is calling the White House Monday, according to a person with knowledge of the matter. His pitch is that that the deal will help the companies invest in more innovative drugs and that Pfizer Plc would have 40,000 U.S. employees at the close of the transaction.

 

Eoin Treacy's view

In a global market countries compete on governance and there is no denying US corporate tax rates are high and compliance is expensive. The USA is still the largest consumer economy in the world by far, and the administration relies on that fact to ensure companies have to have a presence within the country. However that does not mean a company has to have its global headquarters in the USA, not least as global revenues surge. 

All of the focus is currently on the healthcare sector but Apple does the majority of its manufacturing in China, sources parts from all over the world and the USA only accounts for 40% of its sales. It’s reasonable to ask whether this is truly a US company just because its headquarters are in Silicon Valley? 

Ireland has a corporate tax rate of 12.5% and the cost of compliance is low by comparison with the USA. Little wonder then that many major global corporations maintain a presence to avail of such favourable treatment. Ireland has little choice but to make itself as alluring as possible to foreign investment since it has a small population and is far removed from the economic centre of Europe. The USA on the other hand relies on its economic pre-eminence, technological lead and low energy prices to spur growth. It has not needed to compete in governance but this is changing as globalisation intensifies.