Drug Companies Pay Little Tax
15 Apr '24 20:40When you cuddle up to the guys writing the laws, anything is possible in business... 'crony-capitalism'
https://www.npr.org/sections/health-shots/2024/04/15/1244876740/drugmakers-low-taxes-us
"Corporations are supposed to pay a nominal tax rate of 21%. But in recent years, the biggest pharmaceutical companies had an average effective tax rate of less than 12%, according to an analysis by the Senate Finance Committee.
"Why is that happening? Economist Brad Setser, of the Council on Foreign Relations, spent some time trying to understand it. He pointed to Pfizer as an example. "In a typical year, Pfizer reports losing money in the United States and making money abroad," he says. "And as a result, in a typical year, Pfizer pays a lot more in tax outside the United States than it pays inside the United States."
...
"The top five American pharmaceutical companies all had more drug sales in the U.S. than they did in all the other countries in the world put together, according to Evaluate Pharma, which tracks pharmaceutical sales around the world.
Setster tried to explain how that translates to domestic losses when it comes time to pay taxes.
"How do they do it? You license your intellectual property to an offshore subsidiary," Setser tells NPR. "You produce the high value-added active ingredients in a factory in Ireland or Singapore, and you pretend like the profit is accrued to these offshore subsidiaries, even though the sales are back to the United States."
"All of this is legal. Though to be sure, tax law is complicated. There are other nuances, such as acquisitions where the company being acquired had a lot of debt, that can contribute to lower tax rates for companies."
https://www.npr.org/sections/health-shots/2024/04/15/1244876740/drugmakers-low-taxes-us
"Corporations are supposed to pay a nominal tax rate of 21%. But in recent years, the biggest pharmaceutical companies had an average effective tax rate of less than 12%, according to an analysis by the Senate Finance Committee.
"Why is that happening? Economist Brad Setser, of the Council on Foreign Relations, spent some time trying to understand it. He pointed to Pfizer as an example. "In a typical year, Pfizer reports losing money in the United States and making money abroad," he says. "And as a result, in a typical year, Pfizer pays a lot more in tax outside the United States than it pays inside the United States."
...
"The top five American pharmaceutical companies all had more drug sales in the U.S. than they did in all the other countries in the world put together, according to Evaluate Pharma, which tracks pharmaceutical sales around the world.
Setster tried to explain how that translates to domestic losses when it comes time to pay taxes.
"How do they do it? You license your intellectual property to an offshore subsidiary," Setser tells NPR. "You produce the high value-added active ingredients in a factory in Ireland or Singapore, and you pretend like the profit is accrued to these offshore subsidiaries, even though the sales are back to the United States."
"All of this is legal. Though to be sure, tax law is complicated. There are other nuances, such as acquisitions where the company being acquired had a lot of debt, that can contribute to lower tax rates for companies."