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Wyden wants to know how Pfizer cut its U.S. tax bill despite booming sales

Pifzer is the latest company to come under scrutiny by the Senate Finance Committee and Oregon’s senior U.S. senator as they look into pharmaceutical company tax practices
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U.S. Sen. Ron Wyden, center, speaks about the multibillion-dollar advertising campaigns on behalf of Medicare Advantage plans during an event Monday, Nov. 20, 2023, sponsored by the Urban League of Portland at the Hattie Redmond Apartments in North Portland. | PETER WONG/©PAMPLIN MEDIA GROUP USED HERE WITH PERMISSION
May 23, 2024

U.S. Sen. Ron Wyden is pressing Pfizer Inc. to explain how it pays a lower tax rate “than a preschool teacher or a firefighter” despite making billions in profits from U.S. consumers.  

In a letter sent Monday, Oregon’s senior senator asked Pfizer CEO Albert Bourla to explain how the company reduced its tax rate by 75% since 2017 despite the U.S. being the global drugmaker’s largest market. Wyden cited regulatory filings and reporting showing that Pfizer lowered its tax burden by recording much of its sizable profits overseas, which the letter claims was made easier by a Trump-era law. 

“Despite generating over $364 billion in sales over the last six years, Pfizer incomprehensibly pays a lower tax rate than millions of working American families,” Wyden wrote. 

Pfizer did not immediately respond to a request for comment from Oggys Online. 

For three years, as chair of the Senate Finance Committee, Wyden has overseen an investigation into how U.S.-based pharmaceutical companies have increasingly avoided paying taxes while reaping hefty profits from costly prescription drugs sold to Americans. The inquiry has blamed the trend on tax changes approved by the then GOP-led Congress in 2017.  

Wyden’s letter refers to Pfizer’s securities filings that show that following the law’s passage, the company has paid tax rates lower than the U.S. corporate tax rate of 21%. In 2022 Pfizer paid an effective tax rate of 9.6% and received a refund the following year. 

“While the exact methods by which Pfizer is able to pay such low tax rates are unclear, public records indicate that Pfizer books most of its earnings offshore and benefits from changes made by the Republican tax law that lowered tax rates on foreign profits of U.S. corporations,” wrote Wyden. 

Another filing referenced by Wyden attributes Pfizer’s reduction in its effective tax rate to the “jurisdictional location of earnings” where taxes are lower. The filing also mentions an incentive grant in the U.S. territory of Puerto Rico that partially exempts Pfizer from income, property and municipal taxes until 2053. Pfizer also benefits from a tax break in Singapore, according to the letter.

Additionally, Wyden cites reporting from The Wall Street Journal that Pfizer is taking advantage of a tax break in Ireland for multinational U.S. corporations that shift their intellectual property rights and related income to that country.  

“As a result of these arrangements, there is a substantial discrepancy between where Pfizer generates prescription drug sales and where Pfizer books earnings from those drug sales for tax purposes,” wrote Wyden. “The United States is by far Pfizer’s single largest customer market and source of revenue, accounting for approximately half of the company’s sales on an annual basis.”

Pfizer sold over $16 billion worth of pharmaceutical products between 2018 and 2023, but frequently reported its taxable income outside of the U.S. and even reported losses, Wyden wrote. Despite Pfizer reporting $100 billion in revenue in 2022 with 42% coming from the U.SThe company only reported 16% in the country, according to Wyden. 

Wyden suspects the 2017 tax law is rewarding Pfizer for shifting its profits offshore and that other pharmaceutical companies are employing similar tactics. According to the letter, the law means that foreign subsidiaries of U.S.-based multinational corporations are taxed at 10.5%, lower than the corporate income tax rate of 21%, giving them an incentive to shift profits overseas. Wyden asked Pfizer’s executive for documents on its earnings and how much it was paying in taxes in Puerto Rico, Singapore and Ireland. 

Pfizer is the sixth company to come under scrutiny as part of Wyden’s inquiry. In 2022, Wyden released a report showing that AbbVie made 75% of its sales to American consumers but reported just 1% of its income to U.S. tax authorities. Wyden also held a U.S. Senate Finance Committee hearing in 2023 on the topic. 


You can reach Jake Thomas at [email protected] or via Twitter @jthomasreports

Comments

Submitted by Debra Bartel on Thu, 05/23/2024 - 14:00 Permalink

While their tax shift is concerning, I'm more worried about big pharma in general and why American's must pay so much more than people in other countries for the exact same drug.  Their argument that it's to recover research and development costs doesn't hold water - if it costs $15.00 in Spain, it can cost $15.00 here.  It's the very same drug!