At the end of December 2014 the retained earnings on Pfizer’s balance sheet was $72.2 billion. Irish GNP is going to look pretty impressive whenever this inversion is completed as much of this will probably be counted as Irish income. And on an on-going basis Pfizer’s retained profits will count as an income inflow in the Balance of Payments and be added to Irish GNP.
For the last few years Pfizer has paid total dividends on it stock of around $6.5 billion. Net income for the past three years has been $14.6 billion, $22.0 billion and $9.1 billion. Thus the retained earnings have been $8.1 billion, $16.5 billion and $2.6 billion. These are now included in the $72.2 billion currently on the balance sheet but it can be seen that the annual amounts can be very significant and - volatile.
Interpreting Irish GNP figures may become even more meaningless. What won’t be meaningless is the additional EU contributions that we may to make on the basis our of our reported National Income. Is it time for an Irish rebate in the mould of the British rebate?
A less significant impact of the Pfizer inversion will be on the calculation of effective Corporation Tax rates in Ireland. This is because dividends from Pfizer’s subsidiaries will be added as ‘Foreign Income’ in the determination of taxable income in Ireland. However, Pfizer will get credits under ‘Double Taxation Relief’ for corporate income taxes paid elsewhere so the amount of net Corporation Tax due will not increase to the extent that Taxable Income will increase.Tweet