1. How can tax on Pfizer's income be negative? Does it mean Pfizer saved that much money or they received that much amount from the government in Cash?2. What is the effective rate of tax for Pfizer? Can it be negative? Why?3. Give us brief details of what sort of tax benefits and tax expenses impacted FY 2017's Provision/(benefit) for taxes on income? Pfizer Inc. and Tax CutsAct IIn November 2015, CEO lan Read was watching how the young accountant sitting infront of him was getting a little nervous. It was getting dark on a cold day in New YorkCity. Mr. Read himself was a chartered accountant and he had been on the other side ofthe table, therefore he could very well gauge the nervousness of this young accountant.His right hand man Albert Bourla, serving as COO was a little skeptical of the proposal,he expressed his concerns and asked tough questions, that's why the young accountantwas sweating.Mr. Read got up from his soft leather chair and went to pour himself a hot cup of matchalatte, looking at the NYC Skyline from his corner office on 126th floor. He had seen acouple of big shifts in politics and tax laws in his career. After all he had been working forPfizer for more than 36 years now. His colleague Mr. Bourla's concerns were legitimatethough."Will he get the enough votes? Do you think, if he succeeds he will deliver on the taxcuts?" Mr. Bourla asked. The young accountant had put up a scenario where Republicannominee Donald J. Trump wins the 2016 US Elections and delivers on the promise ofgranting tax cuts to big corporates. A signature policy of almost all Republicans, 'TrickleDown Economics', as they called it. Trump had just disclosed details of his tax cuts and allthe things he was willing to do for corporates. Mr. Bourla was unable to trust thisscenario, but if it became a reality it'd mean they will have to act fast and get as muchtax cuts as they can.Taking a sip of his matcha latte, a new fascination of Mr. Read from his latest visit toOsaka Castle in Japan, he looked at Mr. Bourla. Now 54 years old Greek veterinary doctorhad stepped the corporate ladder fast and reached up to the position of COO. Mr. Readliked Bourla, he eventually wanted Bourla to take over after he retires from his post ofCEO having served for 6 years now.Pfizer Inc. had always donated millions of dollars to SuperPACS of Republicans andDemocrats alike; politics after all is a business and no business this big can function in avacuum. It's a symbiotic environment and all players must play the game. Mr. Read knewthis and he also knew one more thing which most people forget when it comes to USPresidential Election. It's not the popularity vote that counts, it's the Electoral College'svote that decides the next president. He knew this from the year 2000 election of GeorgeW. Bush vs Al Gore. Trump had been hinting at running for presidency for so many times that nobodytook him seriously except for hardcore republicans and FOX News. Mr. Read had seenhow the NY City resident and self proclaimed millionaire Trump rose to fame fromhis TV Show 'Apprentice'. He had also seen how Trumps wealth had suddenlyincreased ever since he got the nomination from the Republican party. Mr. Readspoke, while still finalizing his thought in head, "Maybe...just maybe if Trump wins, hewill have to deliver on the Tax Cuts because his Super PAC keeps getting bigger andwe all know who's donating all this money...Wall Street. Trump must deliver"Having heard that after a tense pause, the young accountant relaxed his shoulders alittle and took a sigh of relief. His scenario was going to be analyzed more seriously andhe might very well have saved billions of dollars for Pfizer. If everything went well,he might even get a promotion and a big bonus. Not to mention a chauffeur withLexus, a privilege only senior personnel get in Pfizer.But it was all sandcastles in the air, Trump hadn't won yet and neither the Tax Cuts was areality. All that had happened was this: His big boss and CEO had agreed to entertain thepossibility of one scenario this young accountant had listed out, in some corner ofthe Pfizer headquarter most likely while drinking sixth can of a monster energydrink, and crunching data using Excel and Tableau with millions of Chrome tabs openon his laptop, eating away the precious RAM.The main tasks lied ahead! How much would be the financial impact and whatshould Pfizer do to prepare for all situations that might crop up. What can be done tomake sure that Pfizer has made all arrangements so that in any situation, Pfizerwill get the maximum possible tax benefits and save as much money as they can.

Answered: Image /qna-images/answer/7de9f90a-0eb8-4499-9c2f-4ad21e550329.jpg

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. How can tax on Pfizer's income be negative? Does it mean Pfizer saved that much money or they received that much amount from the government in Cash?

2. What is the effective rate of tax for Pfizer? Can it be negative? Why?

3. Give us brief details of what sort of tax benefits and tax expenses impacted FY 2017's Provision/(benefit) for taxes on income?

Pfizer Inc. and Tax Cuts
Act I
In November 2015, CEO lan Read was watching how the young accountant sitting in
front of him was getting a little nervous. It was getting dark on a cold day in New York
City. Mr. Read himself was a chartered accountant and he had been on the other side of
the table, therefore he could very well gauge the nervousness of this young accountant.
His right hand man Albert Bourla, serving as COO was a little skeptical of the proposal,
he expressed his concerns and asked tough questions, that's why the young accountant
was sweating.
Mr. Read got up from his soft leather chair and went to pour himself a hot cup of matcha
latte, looking at the NYC Skyline from his corner office on 126th floor. He had seen a
couple of big shifts in politics and tax laws in his career. After all he had been working for
Pfizer for more than 36 years now. His colleague Mr. Bourla's concerns were legitimate
though.
"Will he get the enough votes? Do you think, if he succeeds he will deliver on the tax
cuts?" Mr. Bourla asked. The young accountant had put up a scenario where Republican
nominee Donald J. Trump wins the 2016 US Elections and delivers on the promise of
granting tax cuts to big corporates. A signature policy of almost all Republicans, 'Trickle
Down Economics', as they called it. Trump had just disclosed details of his tax cuts and all
the things he was willing to do for corporates. Mr. Bourla was unable to trust this
scenario, but if it became a reality it'd mean they will have to act fast and get as much
tax cuts as they can.
Taking a sip of his matcha latte, a new fascination of Mr. Read from his latest visit to
Osaka Castle in Japan, he looked at Mr. Bourla. Now 54 years old Greek veterinary doctor
had stepped the corporate ladder fast and reached up to the position of COO. Mr. Read
liked Bourla, he eventually wanted Bourla to take over after he retires from his post of
CEO having served for 6 years now.
Pfizer Inc. had always donated millions of dollars to SuperPACS of Republicans and
Democrats alike; politics after all is a business and no business this big can function in a
vacuum. It's a symbiotic environment and all players must play the game. Mr. Read knew
this and he also knew one more thing which most people forget when it comes to US
Presidential Election. It's not the popularity vote that counts, it's the Electoral College's
vote that decides the next president. He knew this from the year 2000 election of George
W. Bush vs Al Gore.

Trump had been hinting at running for presidency for so many times that nobody
took him seriously except for hardcore republicans and FOX News. Mr. Read had seen
how the NY City resident and self proclaimed millionaire Trump rose to fame from
his TV Show 'Apprentice'. He had also seen how Trumps wealth had suddenly
increased ever since he got the nomination from the Republican party. Mr. Read
spoke, while still finalizing his thought in head, "Maybe...just maybe if Trump wins, he
will have to deliver on the Tax Cuts because his Super PAC keeps getting bigger and
we all know who's donating all this money...Wall Street. Trump must deliver"
Having heard that after a tense pause, the young accountant relaxed his shoulders a
little and took a sigh of relief. His scenario was going to be analyzed more seriously and
he might very well have saved billions of dollars for Pfizer. If everything went well,
he might even get a promotion and a big bonus. Not to mention a chauffeur with
Lexus, a privilege only senior personnel get in Pfizer.
But it was all sandcastles in the air, Trump hadn't won yet and neither the Tax Cuts was a
reality. All that had happened was this: His big boss and CEO had agreed to entertain the
possibility of one scenario this young accountant had listed out, in some corner of
the Pfizer headquarter most likely while drinking sixth can of a monster energy
drink, and crunching data using Excel and Tableau with millions of Chrome tabs open
on his laptop, eating away the precious RAM.
The main tasks lied ahead! How much would be the financial impact and what
should Pfizer do to prepare for all situations that might crop up. What can be done to
make sure that Pfizer has made all arrangements so that in any situation, Pfizer
will get the maximum possible tax benefits and save as much money as they can.

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