US Senate Finance Chair looking into pharma international tax abuse

Pharmaceutical industry tax practices involving the use of offshore subsidiaries to avoid paying US taxes are the target of an investigation by US Senate Finance Committee Chair Ron Wyden (D-Ore.), who requested information from Bristol Myers Squibb on January 18.

This latest information request in the enquiry follows a similar letter sent to AbbVie by Wyden last year.

The Bristol Myers Squibb letter asks about the company’s purported scheme to avoid paying US taxes by shifting intellectual property rights for prescription drugs to newly created Irish subsidiaries in 2012. The company, allegedly, saved as much as USD 1.4 billion in US taxes, while reducing its effective tax rate from 24.7% in 2011 to 7% in 2012.

The letter also specifically asks for information regarding the role of the accounting and law firms involved, who supposedly issued lengthy tax opinion letters on the arrangement without addressing whether the arrangement would violate US tax anti-abuse rules. Wyden suggests that this failure to address the anti-abuse rules “raises serious questions as to whether such an omission was deliberate.”

Wyden’s earlier letter to AbbVie similarly asked about that company allegedly placing patents in low-tax jurisdictions, including Bermuda, to avoid paying US taxes. The AbbVie letter also sought information about how changes in the 2017 Tax Cuts and Jobs Act enabled the company to reduce its effective tax rate from 22% to less than 9%.

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