(LR) Richard A. Gonzalez, Chairman and CEO of AbbVie Inc., Pascal Soriot, Chairman and CEO of AstraZeneca, Giovanni Caforio, Chairman and CEO of Bristol-Myers Squibb Co., Jennifer Taubert, Executive Vice President and The Worldwide Chairman of Janssen Pharmaceuticals, Johnson & Johnson, Kenneth C. Frazier, Chairman and CEO of Merck & Co. Inc., Albert Bourla, CEO of Pfizer, and Olivier Brandicourt, CEO of Sanofi testify before the Senate Finance Committee: Drug Pricing in America : A Prescription for Change, Part II” on February 26, 2019 at the Dirksen Senate Office Building in Washington, DC.
Win McNamee | Getty Images
A Republican bill has cut the average tax rate of big drug companies by more than 40% since it was passed in 2017, Democrats on the Senate Finance Committee said in a statement report Thursday.
“Democrats warned in 2017 that the Republican tax bill would amount to a massive gift to multinational corporations, and here’s proof that’s exactly what happened,” Sen. Ron Wyden, D.-Ore., the committee chair, said in a press release on Report.
Republicans’ $1.5 trillion Tax Reduction and Employment Act brought far-reaching changes to tax legislation, including a determination which essentially introduced a worldwide minimum tax on foreign income.
This provision allowed US-based pharmaceutical companies to earn lower tax rates on their foreign income report called.
It has also created a “great incentive” for these companies to move their profits, investments and jobs abroad, Democrats added in the report.
Pharmaceutical companies report 75% of their taxable income abroad, the report said.
According to the committee’s analysis, the pharmaceutical industry paid an average tax rate of about 20% in the years immediately prior to the passage of the law from 2014 to 2016.
According to the report, the average rate fell to 11.6% in 2019 and 2020, resulting in billions of dollars in tax savings for pharmaceutical companies.
“There’s no question that the tax system was broken prior to 2017, but instead of fixing it, Republicans gave Big Pharma the green light for some of the most aggressive tax games highly skilled accountants could imagine,” Wyden said.
He called for sweeping tax reform to ensure big corporations “pay their fair share while helping to boost investment in the US, not abroad.”
The report is Wyden’s latest investigation into Big Pharma’s tax practices. The Oregon senator said the committee will release a final report on the investigation later this year.
Lawmakers have long criticized the industry for skyrocketing drug prices, which can leave some patients without access to life-saving drugs. Wyden’s probe only fuels the fire.
In July, Wyden released a report detailing how the drugmaker operates AbbVie used offshore affiliates to avoid billions of dollars in taxes on prescription drug sales.
The report noted that Chicago-based AbbVie generated 75% of its sales from US patients in 2020, but reported only 1% of its taxable income in the country.
That report alleged that AbbVie holds its intellectual property in a Bermuda-based subsidiary with no employees or other major operations. Bermuda did not levy taxes on the profits, income, dividends or capital gains of this subsidiary.
Wyden also received similar information about other US pharmaceutical companies, including Abbott Laboratories, amgen, Bristol Myers Squibb And Merck.
Most companies reported more than 80% of their taxable income abroad.
Some of the companies have defended their tax approach following the Committee’s investigation.
The companies did not immediately respond to a request for comment on Wyden’s findings.