U.S. Sen. Ron Wyden (D-OR), chair of the Senate Finance Committee, released an interim report on his investigation into the tax practices of large pharmaceutical companies.
The interim report details how loopholes in the tax code have allowed AbbVie, a large multinational corporation based in the United States, to pay less U.S. taxes on prescription drug sales. It cites how more than 75 percent of AbbVie’s 2020 sales were made to American consumers, yet just 1 percent of AbbVie’s income was reported in the United States for tax purposes. The report said 99 percent of AbbVie’s taxable income was reported by offshore subsidiaries in 2020, according to data provided by AbbVie. That 99 percent reported by offshore subsidiaries was likely able to access the substantially lower GILTI rate of 10.5 percent.
The report also looks at the tax benefits Abbvie got from the 2017 Republican tax cuts. The tax law cut AbbVie’s effective tax rate in half, from 22 percent from 2015-2017 to 8.7 percent in 2018, 8.6 percent in 2019, and 11.2 percent in 2020. AbbVie estimates its tax rate in 2021 will be 12.5 percent
“While Big Pharma’s game playing to avoid paying taxes is no secret, the scope of AbbVie’s tax avoidance is eye-popping. We haven’t seen the scale until now. A system that allows a massively profitable company to book 99 percent of its income offshore when 75 percent of sales are in the United States is broken,” Wyden said. “Of course, the Republican tax cuts compounded these problems, just as we predicted. It’s critical that Congress takes steps to fix this broken system so nurses and firefighters aren’t paying higher tax rates than Big Pharma. Policies the Finance Committee has developed, including a minimum tax on corporate profits and reforms to the international tax system, would both get at this problem and deliver on our promise to make corporations pay their fair share.”
Going forward, the committee will conduct related investigations into the tax practices of other large pharmaceutical corporations, including Abbott Laboratories and Merck & Co.