OR WAIT 15 SECS
Randi Hernandez was science editor at Pharmaceutical Technology from September 2014 to May 2017.
Inversions in the pharmaceutical sector could become less lucrative as a result of new tax laws.
New tax rules were introduced on Sept. 29, 2014 by the United States Treasury Department with the purpose of discouraging companies to avoid taxation by merging with foreign companies in another fiscal jurisdiction. This practice of tax inversion has been a significant driver of merger and acquisition (M&A) activity in the pharmaceutical and life-sciences sector, and the curbing of this technique may slow M&A activity, reports Burrill Media.
The new changes will make it more difficult for US companies to benefit from moving a business overseas, where corporate taxes are lower. Specifically, the rules will restrict the ability of US companies to access overseas profits to fund acquisitions without paying US taxes and will also limit the level of ownership the US owners can have in an inverted company.
Inversion deals that were formerly based on tax savings alone will now have to be based on other synergies. However, the new rules will merely slow, not halt, M&A deals in the pharmaceutical sector, notes G. Steven Burrill, CEO of Burrill Media. “When the new session of Congress begins, the controversy over inversions represents an opportunity for comprehensive tax reform and the opportunity to address substantive tax issues of concern to the industry from the effects of tax policy on investment to its ability to incentivize R&D spending.”
Related Content:PharmTech News