FLASH
Shkruar nga Alessandro Lubello
The top seven pharmaceutical groups active in the United States in 2023 not only paid no taxes, but could also boast a refund of $250 million.
In the United States, large pharmaceutical companies register a very large turnover, because this country has the highest drug prices in the world. According to some estimates they are about 3 times higher than in any other country.
However, Brad Setser and Michael Weilandt, two economists at the Council on Foreign Relations (CFR), say this does not translate into tax-generating profits for US tax authorities. Instead, companies surprisingly report losses.
So in 2023, Pfizer says it closed its balance sheet in the United States with a $4.4 billion loss, AbbVie with a $3.5 billion loss, Merck with a $15.6 billion loss, and Johnson & Johnson with a $2 billion loss.
Among the major American pharmaceutical companies, only Eli Lilly recorded profits, albeit a relatively modest one: $900 million. But how is it possible that such large volumes of sales bring losses? Companies are inclined to justify that high prices enable them to finance their expensive research.
But Setser and Weilandt explain how all other multinationals, even pharmaceutical companies, exploit the rules (and loopholes) in tax regimes, so that their profits appear in countries where taxes are significantly lower or even zero. AbbieVie, for example, has been able to concentrate in Bermuda the income from its profitable drug Humira, where it pays no tax on corporate profits.
The company manufactures the drug Humira in Puerto Rico, a territory that belongs to the United States but is not included in the calculation of the tax base for the taxes owed to Washington. Even its subsidiary in Puerto Rico pays huge royalties to AbbieVie's branch in Bermuda, where 99 percent of profits end up (according to 2022 data).
For this reason, the seven main pharmaceutical groups active in the United States in 2023, not only did not pay taxes, but could also boast of a refund of 250 million dollars. And it was not a special year, the two economists add. On the contrary, if the data of 2022 or 2021 are compared, there are no significant differences.
Except for Pfizer, which 2 years ago failed to cash in on the huge revenue generated by its Covid-19 vaccine outside the United States, perhaps because its development was also funded by public funds from the White House.
The paradox is that a company like Novo Nordisk, which has become very rich thanks to the weight loss drug Ozempic, pays taxes in its home country of Denmark. Swiss pharmaceutical companies pay taxes in Switzerland, French ones in France. Americans, on the other hand, benefit from a tax regime that allows them to pay taxes in Ireland, Belgium, Bermuda, Malta or Singapore.
And the problem concerns multinational companies in all sectors. Apple, for example, pays more taxes abroad (mainly in Ireland) than in the United States. Today, Ireland is the largest exporter of drugs to the United States. In 2023, it recorded a market share that is twice that of Canada, China, India and Mexico. The Cayman Islands and the British Virgin Islands are the largest exporters of financial services to the US market, while Bermuda leads in the insurance sector. A 2017 International Monetary Fund study showed that global foreign investment after the Great Depression of 2008 did not fall largely thanks to capital flowing through major tax-avoidance centers.
There is no doubt that the case of pharmaceutical companies is sensational, and will require intervention by the US government. However, Setser points out that this anomaly tells us a lot about the current state of globalization. In recent years, this phenomenon has taken off following the success of nationalist and protectionist political leaders as well as trade conflicts between major powers, especially between the United States and China.
In reality, Setser specifies, globalization is proving quite resistant: despite tariffs, bans and threats of conflict, goods, services and capital continue their journey on global roads. But basically, there are two phenomena that have greatly distorted the globalized economy for some time: on the one hand there is China, which is flooding the world with products (electric cars and other technologies related to the energy transition) without stimulating demand internal.
On the other hand, there is tax avoidance by multinational companies. According to an initiative of the Organization for Economic Co-operation and Development (OECD) in 2015, a global minimum tax of 15 percent on the profits of multinational companies aims to solve this problem.
But at the moment, it cannot be said that it has brought a slowdown in tax evasion. Those who are worried about the slowdown of globalization and who want to save it from trade wars and nationalism, Setser concludes, should try to correct some distortions./ Adapted "Pamphlet" from "Internazionale"
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