Johnson & Johnson, Pfizer, Merck, and Abbott Laboratories saved an estimated $7 billion
Pharmaceutical giants Johnson & Johnson, Pfizer, Merck and Abbott Laboratories benefited from an estimated $7 billion in tax savings last year from two central provisions in the new US tax law, according to a new analysis of end-of-year financial statements released by Oxfam America ahead of Tax Day. This gain is enough to pay for health insurance for more than two-thirds of the children in the US who do not have health coverage.
Amid growing concern that the pharmaceutical industry’s pricing, tax and lobbying practices are undermining the health of millions of people in the US and across the globe, Oxfam America’s analysis shows how four US drug companies saved about $1.7 billion from the cut in the US corporate tax rate while receiving an estimated windfall of $5.3 billion thanks to the rebate on previously untaxed offshore earnings. The companies prioritized investor payouts in the form of stock buybacks and dividends while investments in research and development remained stagnant.
“Despite promises that tax cuts would bring billions back onshore and create jobs, drug companies are still dodging their taxes, still charging sky-high prices and still paying off their wealthy executives and shareholders instead of boosting investments in life-saving research and development to lower drug costs,” said Paul O’Brien, Vice President of Policy and Campaigns at Oxfam America. “US companies paid $92 billion less in tax in 2018 than in 2017, at a time when revenue is needed more than ever. The biggest corporate tax cut in a generation is boosting the short-term profits of global companies like Johnson & Johnson, Pfizer, Merck and Abbott Laboratories at the expense of the poorest, especially women and girls.”
Fewer taxes means less investment in America’s schools, hospitals, and people. But it is not only the American people who suffer from tax revenue losses. The new US corporate tax law may be leading a race to the bottom that will deplete the tax revenues of countries around the world raise from multinational companies. Mexico, for example, with high trade exposure to the United States, could lose over 30 percent of its already-dwindling multinational tax revenue because of the US corporate tax makeover.
By failing to pay their fair share in taxes, large corporations like Johnson & Johnson, Pfizer, Merck and Abbott Laboratories, which are directly dependent on government support to protect their patents, buy their products and invest in research and development, are abandoning their contributions to essential public investments. These investments are essential to combat gender, racial and economic inequalities in both the US and around the world.
“On a daily basis, taxes save lives. In the richest country in the world as well as in the poorest, taxes fund schools, health clinics, public safety programs, medicines, and many other services so vital to a life in dignity,” said Winnie Byanyima, Executive Director of Oxfam International. “But corporate tax dodging reduces the funds available to invest in public services, with particularly disproportionate, adverse impacts on girls and women because they are more likely to live in poverty.”
Oxfam is calling on corporations to pay their fair share by publicly committing to pay taxes on profits where economic activity takes place, and to stop shifting profits to low-tax jurisdictions. Oxfam is also calling on the US Congress to require multinational companies to publish country-by-country tax reports to ensure they pay their fair share of taxes where economic activity takes place.
“Without our taxpayer dollars, these companies would not be profitable. Whether it is taxpayer-funded research at the NIH, taxpayer-funded legal and patent protection, taxpayer-subsidized charitable and marketing activities, taxpayer-paid prescription drugs through Medicare, or taxpayer-funded schools that educate their employees, these companies rely on a functioning tax system to thrive,” said Nicholas Lusiani, Senior Advisor at Oxfam America and author of the report. “It’s time that these companies hold up their end of the bargain.”