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Parliament TV

Pfizer chiefs stonewall MPs on tax gains

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13th May 2014
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Pfizer chief executive and chairman Ian Read got a hostile reception when he explained his company’s rationale for acquiring Astra-Zeneca to the House of Commons Business, Innovation and Skills select committee in Westminster this morning.

Read, a Scottish-born accountant who has worked at Pfizer for more than 30 years, told MPs that Astra-Zeneca’s pipeline of products, operational synergies and potential tax savings made the £63bn deal an attractive proposition.

But he got a rough ride from the committee. To warm them up for the session with Read and his fellow Pfizer colleagues, vice president and chief financial officer Frank D'Amelio and UK managing director Jonathan Emms, the committee heard from union officials who were deeply concerned about the company’s motives and behaviour.

Alan Black, the national officer at GMB, said Pfizer’s assurances were “paper-thin” and that it had a history of cutting back on R&D budgets following takeovers.

“If Pfizer goes ahead with its bid I would expect the government to secure much stronger guarantees,” Black said. If the assurances were not legally enforceable, he added, “I would want the secretary of state to intervene to stop this bid all together.”

At issue was just how much investment Pfizer would make into R&D in the UK, and the characterisation of the company by Aberdeen Asset Management as “ruthless cost-cutters” after 30% cuts in research following its previous acquisition of Wyatt.

When he presented his case, Read assured the MPs that the company was committed to maintaining 20% of its research workforce in the UK, partly to take advantage of the Patent Box regime that made locating its tax domicile here so attractive to the company.

Scottish Labour MP Willie Bain suggested to Read that commentators saw the Astra-Zeneca bid “as the last hurrah of a business model that’s broken down”. The big blockbuster drugs that have driven the industry are falling away and the drive to consolidate big pharma is just a reaction to that, he suggested.

Read empahsised that the company was organised around scientific expertise in specific research areas and would continue that way. “I think the way we’re going is the way the industry is going,” he argued.

But Conservative MP Brian Binley was just as scathing: “Your talk has been a lot of sales talk, but very short on fact,” he told the Pfizer chairman.

Conservative Nadhim Zahawi sought answers from Frank D’Amelio on the tax domicile issue. The Pfizer CFO identified several aspects of the UK environment that were attractive to the company: the statutory corporation tax going down to 20% was a good start, but the R&D tax credit and patent box coming into play by 2017 were “all important to us”.

But he repeatedly resisted the committee’s requests for estimates of the potential tax savings, reportedly worth £1.4bn.

“I don’t want to comment on someone else’s figures,” D’Amelio told committee chairman Adrian Bailey (Labour).

Over past years, D’Amelio did tell the committee that Pfizer’s consolidated tax rate was around 27-30%. “Clearly for any combined company going forward, that rate would be less,” he said.

Read expanded on the tax benefits for both Pfizer and the UK, based on his belief that the combination would be more successful than separate companies. “That will generate employment tax revenue from the 20% of our scientists in the UK,” he said.

“As we utilise the patent box, which is very attractive, the revenue… will accrue to UK. It’s a clever strategy on the part of the UK. If you invent in the UK and manufacture in the UK, tehn the profitability is subject to the patent box rate of 10%, which is very attractive.”

But Pfizer’s positive spin fell on stony ground. Binley responded: “Mr Read, the fundamental problem is a lack of trust with this committee. You have no intention of telling us the amount of tax you would expect to save. Why on earth should we believe you?”

Vince Cable, business secretary, later told the committee that blocking a bid could be “tricky”.

Cable said that while the government is able to help provide transparency and analysis over the deal, it has to strike the balance between being business-friendly and protecting the wider interest of the UK.

“The framework which we have under the act, as you know, confines the public interest test quite narrowly and, of course, all of that takes place within the framework of European merger law.

“If the assurances by Pfizer are not satisfactory, then there is the option of secondary legislative remedies but we are not changing the Takeover Code. The option of the intervention would remain open to us. Out of all the things we are worried about, the short time in terms of the deal being proposed, isn't one of them,” he said.

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By HUGH W DUNLOP
14th May 2014 21:00

Pfizer
Pascal Soriot has stated that lives may be lost during the takeover. But he will still get a very good payment for his services.So how much value does he put on a human life? 5 thousand. 10 thousand, more? At 54 he will probably have some years ahead of him. Will he be able to sleep peacefully?

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By VIOLA26
19th May 2014 09:01

BIS Select Committee - what a joke. 

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