American pharmaceutical companies aren't paying tax in the U.S.

https://www.cfr.org/blog/american-pharmaceutical-companies-still-arent-paying-tax-us

by luu • 1 year ago

60 46 1 year ago

cfr.org

mnemotronic• 1 year ago

I hope this isn't true. I'm very upset reading this.

billy99k• 1 year ago

Why? Many are reporting losses. Do you expect them to pay taxes on something other than profit?

like_any_other4• 1 year ago

reporting losses

"According to Lucasfilm, Return of the Jedi (1983) "has never gone into profit", despite having earned $475 million at the box office against a budget of $32.5 million." - https://en.wikipedia.org/wiki/Hollywood_accounting

financetechbro• 1 year ago

This is all just accounting nonsense and tax loopholes. Did you even read the article? FTA:

Merck reported a loss of almost $2 billion in the U.S. while making $22 billion abroad. Johnson and Johnson reported losing just under $500 million in the U.S. while making $17 billion abroad. Pfizer reported U.S. losses of around $500 million while making $9 billion abroad. AbbVie apparently lost nearly $8 billion in the U.S. while making over $11 billion abroad (mostly in Bermuda) and Bristol Myers Squibb reported a loss of $15 billion in the U.S. (tied to the accounting of an acquisition) and $6.5 billion of foreign profits.

yieldcrv3• 1 year ago

This is a well researched article, my main disagreement in this field is the hubris necessary to even think greater tax receipts are the goal, and this is reflected in the language choice.

I think this is a blind spot as it seems the only people interested would be those hoping for some kind of "tax justice" which taps into a popular sentiment: people choosing to wonder why we aren't being screwed equally, instead of wondering why we are being screwed at all.

I get it, your tax bill comes and is inconvenient, someone else in a seemingly higher tax bracket seems to leverage a card or chess move that you don't have the ability to pursue.

But this is all a red herring. To the Supreme Court, choosing to go to a gas station in a neighboring town for lower tax rates is just as valid as doing what some multinational does for lower tax rates by having a nominal structure in another country. (And that's from the Supreme Court you actually liked!)

The aggregate priority of the US government is velocity within the economy. The speed that money moves within the economy, not the revenue collection from [ostensibly] facilitating it.

And even detractors to this reality can never reach agreement on what a "fair share" is. A completely arbitrary and undefined sentiment, based on a misunderstanding of the world and that individual's own socioeconomic status or outright mediocrity.

What is the most interesting is that these multinationals are sometimes paying tax somewhere else. Like the article mentions about how they are currently paying Denmark at 22% and have an inability to deduct enough. Ultimately, the state needs to figure out their revenues, taxing earnings is not the only way to do that and its only controversial to say that because some states can't balance their budget without it, and yet, others can by providing a good or service people are willing to pay for.

like_any_other4• 1 year ago

Can you explain why you think wanting everyone to comply with the spirit of the (tax) law is "hubris"?

yieldcrv3• 1 year ago

I wound say the reaction when people don’t meet an observer’s understanding of “spirit” is where the hubris arises

And I explained that earlier: people want others to suffer as much as them. But it doesn't make any sense. The government isn't entitled to your productivity, assuming otherwise is where the hubris arises.

I mean look at the name of the regulation that was passed for using offshore entities: GILTI (“guilty”). And now it is ironically being used to nullify tax receipts. But the United States isnt entitled to be the recipient of all capital and productivity. No state is. It doesn't matter that they offer some semblance of stability and infrastructure, that doesnt justify any particular percentage. Their funding problem doesnt justify any particular percentage. Thats where the hubris becomes apparent.

parineum4• 1 year ago

The spirit of the law is that corporations only pay taxes on profits.

The "fair share" crowd don't seem to ever consider that a corporate tax isn't a given. The money that passes through corporations gets taxed through many means. The economic activity they create creates tax revenue that would otherwise not be there, even without showing a profit.

Because of that, there's a very reasonable, non-corporatist argument that they could just not pay taxes at all and it would generate just as much tax revenue. It's not a given that they should.

bell-cot• 1 year ago

Um, yes?

My impression is that huge corporations in a wide variety of industries are using various dodges to more-or-less avoid paying US taxes.

(But they are paying their US lobbyists and politicians quite generously, so this situation isn't likely to change.)

bamboozled2• 1 year ago

Sometimes it seems like the only people who actually pay tax are middle class, full-time employees.

All my friends, even who have random part times businesses just seem like they have a lot more spare cash floating around than me. It's the only explanation I have, they're not being honest about the tax they pay and mostly getting away with it.

If I had 40% more income I'd be cruising pretty nicely too.

edmundsauto• 1 year ago

This is a keeping up with the joneses tale. People with flashier spending habits often have rotten savings habits. Never judge yourself by what other people show you.

trdtaylor1• 1 year ago

In a way; but even 'savings' are easily manipulated with business vs w2 income. You can do mega 401k contributions (60k-100k+ per year dependent on circumstances), can roll to IRA, use a self-directed ira for further investments in family land or businesses ($millions per year).

Management companies in different states/countries work wonders to drop your tax and increase money you can spend. Even small guys $1mil rev are doing things like a Dubai management company nesting.

article hinted at it via the IP onshoring talk.

bamboozled2• 1 year ago

Personally I just think it's the reality. The bulk of busy tax payers are middle income earners who just do the honest thing and don't have the time available to workout how to rort the system.

Once you have enough disposable incoming, you can start to pay accountants to do money magic for you.

colingauvin• 1 year ago

This, of course, is a big charade. The cost of producing a drug is low relative to its sales price (gross margins are high, see the pharmaceutical companies’ 10-Ks!)

A drug is not a widget. You can't just make one. Almost all drug programs end in abject failure, usually far before even the clinical trial phase. Gross margins have to be high because you have to pay for 10 failed programs with the successful one.

And one reason that profits are low in the US because that's where there R&D happens.

sebazzz• 1 year ago

I don't think we need to have any empathy for drug companies which acquire existing drugs and then bump the price multiple times.

DrNosferatu4• 1 year ago

Big Pharma profits low in the US? Please. Their R&D happens wherever talent is cheapest, their tax havens wherever laws are loosest, and their profits—record-breaking year after year—safely deposited wherever shareholders are happiest. If only their medicines were as creative as their accounting.

The real innovation is their business model: socialize the research costs, privatize the profits. Billions in taxpayer dollars fund the basic science, university labs, and early clinical trials that underpin 'breakthrough' drugs. Yet when these public investments strike gold, not a penny in dividends flows back to the public coffers that made it possible. Instead, we pay twice—first through our taxes to develop the drugs, then through world-leading prices to access them. That's not capitalism; that's a publicly-subsidized monopoly.

WeylandYutani• 1 year ago

Exactly. We don't live in a cyberpunk world were corporations run their own universities and have their own private army.

Everything that allows a company to exist- from electricity to roads to law enforcement of patents is funded by taxpayers.

missedthecue• 1 year ago

The expensive parts of drug R&D aren't the 'talent', it's the clinical trials. You can't simply offshore those, not if you want FDA approval.

Summit Therapeutics is the largest drug company by market cap without an approved product and has only 159 employees. Only a fraction of which are scientists. They are spending 2x as much on R&D every quarter as they are on total G&A expenses company-wide. It's basically all clinical trials. They're already in about $600m for R&D alone since they went public. If they don't get that back from patients/insurers, they're unsustainable.

throwawayqqq11• 1 year ago

The cost of trails and approvals is not something that needs to be covered because these costs are optional (and i guess the processes can be paused arbitrarily). Profits allow you to invest in new drugs but there are other ways of financing those, like investors or loans.

The general point is, that large drug companies can leverage many things while pretending R&D _requires_ high margins.

johngladtj• 1 year ago

Do you think investors just give money away?

therealpygon• 1 year ago

Oh, that definitely explains the record profits. How silly of everyone. Everyone you can put the pitchforks down, it’s fine, we should just ignore that they run an excessively profitable business overcharging for basic life-saving drugs developed 10 years ago because they occasionally lose money on new drugs, even though it’s not nearly enough to cause a dip in profit. It’s fine, it’s all fine, move along.

physicsguy• 1 year ago

The US blocked the treaty which would have prevented companies getting a meaningful benefit from profit shifting by agreeing a minimum corporate tax rate

https://www.business-standard.com/world-news/donald-trump-ef...

American pharmaceutical companies aren't paying tax in the U.S.

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