Thanks to changes in tax law six years ago, several of the largest pharmaceutical companies saw their tax rates fall substantially, but they also reported that most of their profits were shifted offshore in an effort to avoid paying U.S. taxes, according to a memo by a U.S. Senate Committee.
Specifically, the average effective tax rate for seven of the biggest drugmakers fell by 40% — dropping to 11.6% in 2020, down from 19.6% in 2016. In 2017, a new law was passed that permanently lowered corporate tax rates from 35% to 21%. Meanwhile, many of the largest pharmaceutical companies reported that 75% of their profits came from overseas.
“There’s no question that the tax system was broken prior to 2017, but instead of fixing it, Republicans gave Big Pharma a green light for some of the most aggressive tax gaming highly trained accountants can dream up,” said Ron Wyden, who chairs the U.S. Senate Finance Committee and has been probing industry tax practices. He called the tax rates “astonishingly low.”
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