An article in the New York Times today explores the relationship between tax breaks and job creation and finds that drug and biopharma companies are sheltering profits. Below, an excerpt from the piece by Alex Berenson:
Drug makers were the biggest beneficiaries of the amnesty program, repatriating about $100 billion in foreign profits and paying only minimal taxes. But the companies did not create many jobs in return. Instead, since 2005 the American drug industry has laid off tens of thousands of workers in this country.And now drug companies are once again using complex strategies, many of them demonstrably legal, to shelter billions of dollars in profits in international tax havens, according to their financial statements and independent tax experts.In one popular accounting move, companies declare their foreign markets as far more profitable than their American businesses "” even though drug prices are typically higher in the United States than anywhere else in the world.Drug makers are not the only American multinationals using tax loopholes to declare large portions of their income beyond the reach of the Internal Revenue Service. The Brookings Institution estimates that multinational companies are using overseas tax shelters to lower their payments to the Treasury by about $50 billion a year.But the drug industry accounts for one of the biggest portions of that shortfall, according to the I.R.S. and independent tax experts. And the nature of their business gives drug makers techniques, like sheltering valuable pharmaceutical patents in tax-friendly havens like Ireland, that many other industries cannot use.Moreover, the sheer heft of the American drug industry, which had about $60 billion in pretax profits last year, can give disproportionate weight to the economic impact of its tax sheltering techniques.Even though the tax amnesty legislation has expired, its passage encouraged companies to be even more aggressive about sheltering money, expecting another holiday in the future, said H. David Rosenbloom, director of the international tax program at New York University. Democrats and Republicans supported the legislation, which passed with sizable majorities in October 2004."Congress can swear on two stacks of Bibles that it'll never do it again," Mr. Rosenbloom said, "but they've lost their virginity."
