Fallout

Pfizer Inc and Allergan PLC terminated their planned $150 billion merger after the Obama administration took aim at the deal that would have moved the biggest drug company in the US to Ireland to lower its taxes.

Yup.  Because the Progressive administration Knows Better than business leaders how those businesses should be managed.

The decision to walk away is the latest setback in Pfizer’s long-running efforts to overcome what Chief Executive Ian Read has said was the company’s competitive disadvantage with foreign rivals that faced significantly lower tax bills.

Of course, Jack Lew, the Treasury Secretary whose tax rules the center of the administration’s aim, knew this would be part of the result.

In addition, the failed deal also hurts Pfizer’s plans to break itself up. Company executives have considered splitting the company for years….

Of course, Lew knew this, too.  This pattern of abuse makes me wonder how closely Lew is coordinating his actions with Richard Cordray, the Consumer Financial Protection Bureau MFWIC.

More Governance by Fiat

This time regarding American businesses merging with overseas companies and moving to that overseas lower corporate tax environment.  This improves profits for the businesses’ owners, never mind that.  It reduces revenue for the Know Betters in our Government.

The new [Treasury Department] rules, the government’s third wave of administrative action against inversions, will make it harder for companies to move their tax addresses out of the US and then shift profits to low-tax countries….

[Emphasis added]

The aggressive nature of this latest round also comes

from a Treasury Department that has expressed frustration at the limits of its own powers in curbing these transactions.

Because Know Betters always want more power.  It’s not mete that the plebes and commoners should be in their way.  Here’s the gist of these rulers’ latest power grab:

The rules have two main parts….  First, the government would go after what it calls “serial inverters,” large companies created through multiple inversions or takeovers of US companies. The government would disregard US assets acquired by such companies over the previous three years.

And

To reap the full benefits of inverting, the US company’s shareholders should own between 50% and 60% of the merged entity, which requires a partner of carefully calibrated size.

Because business decisions concerning the details of a merger are better made by the Know Betters of Government than they are by the owners and managers of the businesses involved.

And

Treasury’s second action would limit what is known as earnings stripping, a practice that follows many inversions and other cross-border acquisitions that helps lower companies’ effective tax rates.

Inverted companies—in fact, all non-US-based companies—can lend money to their US subsidiaries.  Those moves create deductible interest in the US, reducing the income subject to the 35% US corporate tax rate and shifting income to a lower-taxed jurisdiction.

Because business leaders can’t be allowed to honor their fiduciary duties to the business’ owners by looking to maximize profit and to maximize revenue left in the business’ hands.  No, not when doing that runs counter to the demands of Know Betters for ever more money for Government.

Jack Lew, author of the rules in his capacity as Treasury Secretary had this bit of disingenuosity in defense of his latest stab:

After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States—including our rule of law, skilled workforce, infrastructure, and research, and development capabilities—all while shifting a greater tax burden to other businesses and American families[.]

Never mind that inversions could better be discouraged by lowering our existing corporate tax rates to internationally competitive levels, and which thereby would shift no burden to other businesses and American families.  Lowering taxes is anathema to a gang that sees tax revenue as another path to their political power. (Certainly, Treasury can’t lower tax rates on its own, but Lew is carefully silent on this matter.)

Elections have consequences, folks.

A Telecon Transcript

A leaked phone call held by International Monetary Fund officials is exposing strains between Greece and its international creditors, highlighting the risk that the country’s bailout program could be headed for more drama this summer.

And from that phone call,

“Look, you Mrs Merkel you face a question, you have to think about what is more costly: to go ahead without the IMF…or to pick the debt relief that we think that Greece needs in order to keep us on board,” Mr [Director of the European Department of the IMF, Poul] Thomsen tells his colleagues, according to the Wikileaks transcript.

A couple of thoughts on this.  Were I Merkel, I’d have something like this to say to the IMF: “I don’t appreciate ultimatums, Mr Thomsen.  Your threat has made our pick for us.  We’re done here.”  I’m not sure she’s ready to cut the cord, though.

And: who leaked the transcript?  The IMF, to pressure Greece (rather than Germany)?  Germany, to prepare Europe and Greece for the IMF’s withdrawal from the bailout?  Greece, to pressure the IMF and/or Germany?

Censorship

…and cowardice?

France’s privacy regulator, known as CNIL [National Commission for Computing and Liberties], last week fined Google €100,000 ($112,000) for not applying Europe’s “right to be forgotten” across the search engine’s global network of sites.

And

Now Paris contends that only a world-wide scrub will do. “For people residing in France to effectively exercise their right to be delisted, it must be applied to the entire processing operation,” the regulator says.  If it stands, this ruling would compel Google to remove links globally.

Aside from simple free speech questions in the land of Voltaire, this

limits the ability of non-Europeans to vet French prospective business associates or German job applicants.

To say nothing of the sovereignty of nations outside of France.  Or CNIL is saying the whole world is part of Metropolitan France.

This whole smelly affair should make it…difficult…to do business in France, for Google and for those non-Europeans.

Google says they’ll appeal, but then what?  Will they have the courage to ignore this idiocy, this arrogant power grab outside French borders?

American Exceptionalism

seen from the other side of the world.  Singapore Prime Minister Lee Hsien Loong has a perspective.

Every one of America’s important trading partners in Asia, he points out, now has China as its “biggest trading partner.”  These nations know they will have a freer and more open trading system if America, not China, is writing the rules.

And

What makes it all so twisted [the debate over the TPP], says Mr Lee, is that no one in Asia is rooting for an American retreat.  To the contrary, Asian leaders are eager to make America great again….

And

“Your role,” says Mr Lee, “remains indispensable, whether you are prepared to step up to it or whether you decide to chuck it.”

And one last bit, which might seem self-serving but, even were it so, is no less true for that:

…you are wealthy enough and resilient enough to be able to help those who are buffeted and to take advantage of the opportunities which are out there, rather than say “I don’t want the competition….”