Pfizer has always prided itself on its commitment to corporate social responsibility (CSR). The drugs giant talks loftily about “embracing our responsibility to society”. It insists that it does as much as it can to make sure that the world’s poor can gain access to its products. It is particularly proud of the work that it does with NGOs and “other global health stakeholders” to strengthen and improve health-care systems. But this has not deterred it from seeking a gargantuan “tax inversion”. The company intends, as part of a $160 billion takeover of Allergan, to shift its tax domicile from America to Ireland, where Allergan is domiciled, and where corporate-income taxes are considerably lower. Pfizer’s shareholders no doubt rejoiced: in 2014 the company would have saved $1 billion of the $3.1 billion it paid to the US Treasury. But many Americans were outraged: Hillary Clinton, the front-runner for the Democratic presidential nomination, promised to impose an “exit tax” on companies that engage in such tactics.
A paper in the January issue of the Accounting Review suggests that Pfizer is far from unusual in trying to perform this pro-CSR, anti-tax straddle. David Guenther of the University of Oregon’s Lundquist College of Business and his co-authors compared the effective tax rates paid by a sample of American firms between 2002 and 2011 with a measure of those companies’ CSR programmes compiled by MSCI, an index provider. It found that the companies which do the most CSR also make the most strenuous efforts to avoid paying tax—and that those with a high CSR score also spend more lobbying on tax.
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