Forbes’ Matt Herper Now Agrees — Merck’s Mr. Frazier Was “The Adult In The Room” — On US Tax Responsibilities

I’ll not unduly belabor this one, but for quite a while now, I’ve written favorably of Mr. Frazier’s statements — and actions — as to the general questions surrounding US taxation of multinational companies like Merck, and Pfizer. I’ve also been a fan of his view that mega-inversions are both distracting, and potentially unseemly, at least in life science space, given the level of support the US government policies provide to life science companies (think here of vaccine shield laws; R&D credits; NIH grants; and on and on).

Yesterday, Mr. Herper said that the US Treasury rules were a bad idea. Today, Matt graciously notes that Mr. Frazier looks pretty smart — as to the deals “he chose not to do.” Read that as mega-inversions, and redomiciles. [In passing, I’ll note that the last two days’ events call the Shire-Baxalta redomicile deal into sharp question, as well. And, I will note that Mr. Ian C. Read’s plainly-wounded mega-vanity is showing — this morning. He’s probably looking at a break up of his three businesses. Some other day I’ll cover that Fred Hassan protégé, one Brent Saunders angle, in all of this.]

Matt has a great piece out this morning — and here’s a bit — but do go read it all:

. . .[Merck CEO Kenneth Frazier, speaking in 2012:] “I would say that Merck is not interested in pursuing a business development deal either solely or primarily for the specific purpose of tax inversion. . . .

As we have said before, our goal is to be the premier research-driven biopharmaceutical company. Our strategy is built on innovation in the pipeline”. . . .

So I’ll perhaps immodestly claim to be three-for-three, predicting each of Mr. Read’s mega-flame-outs, and declaring Mr. Frazier’s as the smarter view, on tax policy.

But make no mistake — we support the notion that the US corporate taxation system is in need of comprehensive rework. Think here especially about repatriation of overseas parked cash (as just one example).

Merck has around $52 billion “permanently” parked overseas, and Pfizer has about $82 billion. Apple has over $120 billion similarly parked — we need to find efficient ways to fairly incentivize these companies — with sound tax policy — to put that money back to work inside the USA.

Onward. . . on a chilly, rainy Wednesday — but smiling, as ever. . .


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