Commenting on the takeover of AstraZeneca, Research Director of the Adam Smith Institute, Sam Bowman, said: "Pfizer’s takeover of AstraZeneca must be allowed to go ahead unmolested by politicians. The case for blocking the takeover is simple protectionism: the idea that government should interfere in international trade flows to stop native jobs from being lost.
"This idea is long-discredited: Mergers and acquisitions take place because firms and their shareholders see opportunities for efficiency gains that come from increased economies of scale and scope – blocking a takeover on the basis of economic nationalism would likely lead to a poorer, less efficient world than it could otherwise be. That is true even if the takeover results in job losses in Britain (and it is far from clear that it will).
"More urgently for the country, blocking a takeover could have a profound impact on multinational corporations’ view of Britain as an open economy where the rule of law prevails, chilling future investment into Britain.
"In fact, the takeover will lead to Pfizer-AstraZeneca domiciling itself in Britain, meaning that it will pay corporation tax here instead of in the United States. This should be seen as a triumph for the government’s corporation tax cuts, and encouraging evidence that cutting taxes leads to a larger revenue base, offsetting the cost of those tax cuts.
"Some have argued that this represents a ‘race to the bottom’. When it comes to corporation tax, that’s exactly the race we need. As recent Adam Smith Institute research has shown, corporation tax falls mostly on workers’ wages, with the rest acting as a growth-inhibiting tax on capital.The government should view this takeover as an endorsement of Britain’s relative competitiveness, and be emboldened to go even further by cutting taxes on investment."
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The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.