It's no secret that one of Pfizer's motivations in its $100 billion bid for AstraZeneca is to save big on U.S. taxes. By purchasing a foreign company with company cash being held overseas, the pharmaceutical giant avoids getting hit by the U.S. federal corporate tax rate of 35 percent.

As part of the deal, Pfizer is also seeking to incorporate in Britain, a break from the company's American roots — and the American corporate tax rate. But Pfizer isn't picking just any country as a potential new home for incorporation. The British government has been tweaking its tax code in recent years to make it easier for businesses to lower their tax bills — especially for multinationals with byzantine accounting structures. And in the pantheon of companies that do this, few are more adept than tech and pharmaceutical companies. Companies exactly like Pfizer.

The reason, without getting too much into the weeds, is that companies such as Pfizer heavily rely on intellectual property, and because IP is intangible, the firms can shift their income to tax havens unlike other companies. So rather than pay a 35 percent rate on income earned in the United States, the company can find ways to attach that money to a different country with a much lower tax rate. The result: a dramatic fall in the effective tax rates paid by multinationals in the United States.

Rather than crack down on this, George Osborne, the British equivalent of U.S. Treasury Secretary Jack Lew, has effectively gone and added a number of green lights. The British tax rate is dropping from 23 percent to 20 percent, and, even more critically, officials have added policies that make it easier, not harder, for companies to avoid paying taxes on income overseas. (For examples of how this works, see this post.) In fact, Richard Murphy, an accountant and advocate in London, thinks that Britain is turning into one of those infamous tax havens like Bermuda and Switzerland.

"The consequence of the change that George Osborne introduced was to make the U.K. itself into a tax haven, and that is exactly what Pfizer wishes to exploit by taking over AstraZeneca and then relocating its headquarters, at least notionally, to the U.K., to become U.K. tax resident," writes Murphy. "What this would mean is that all of Pfizer’s profits located outside the USA would then fall out of U.K. tax, altogether, as well as falling out of U.S. tax, meaning that this offshore cash pile would then be tax-free, for good."

This is precisely why tax experts think that Starbucks — another company adept at shifting income around in creative ways — recently announced it was moving its European headquarters to London. Other firms, like the advertising giant WPP, are relocating back to London after decamping to Dublin, where officials also have tried for years to woo companies with a generous tax code.

So the Pfizer story isn't just about the United States losing a chunk of its tax base to another country. This kind of tax arbitrage means that no one gets the tax base. It's a lot like the global version of when a big company in the United States threatens to move its headquarters out of one state, and other states begin competing furiously with various tax incentives to draw the firm to their turf instead. Ultimately, the biggest winner is the company.

The Organization for Economic Co-operation and Development has figured out that this situation looks increasingly like a race to the bottom, and so it has begun drawing up possible policy responses. But the situation has been years in the making and continues apace as countries try to compete via their tax codes.

AstraZeneca has rebuffed Pfizer's advances, so it's hardly a done deal that the New York-based pharmaceutical firm will decamp to Britain.

Pfizer said that even if it does close the deal, its commitment to the United States will "remain firm." "The combined company would continue to be headquartered in New York, where Pfizer was founded, be listed on the NYSE, and be a major employer in the states where we operate," said the firm in a statement. "We will also continue to pay taxes on the U.S. profits of the combined company."

As measured by its U.S. federal taxes, Pfizer's ties to this country are relatively small. Last year, it reported $142 million in federal tax costs out of $15.7 billion in worldwide earnings. That's just 0.9 percent of total income, whereas on paper, U.S. firms are supposed to pay closer to 35 percent in tax on all that money. The year before, the tax figure was negative: -$941 million. (Note: U.S. public companies do not reveal the actual amounts paid to Treasury every year, so these numbers are accounting approximations found in the company's 10-k.)

In other words, the U.S. Treasury doesn't have much revenue to miss if Pfizer goes away.