US Senate Finance Committee Chair Ron Wyden, D-Ore., on June 2 began an investigation into AbbVie’s international tax strategies and accused the biopharmaceutical company of using the 2017 US tax law change to shift profits overseas and avoid paying taxes on US prescription drug sales.
Rather than using the “massive” tax cuts from the 2017 tax law to reduce American drug prices and make them more in line what other countries pay for the drugs, AbbVie instead chose to deliver a USD 10 billion windfall to its investors by greatly increasing the amount of money it spent buying back its own stock, Weiden said in a letter to the company.
“It appears that AbbVie shifts profits offshore while reporting a domestic loss in the United States to avoid paying U.S. corporate income taxes, and that the current U.S. international tax system seems to encourage that,” he said.
AbbVie’s effective tax rate dropped to only 8.7 percent in 2018, just one year after the 2017 Republican tax law was passed, according to Wyden. AbbVie then paid an effective tax rate of just 8.6 percent in 2019 and only 11.2 percent in 2020, “rates that are far lower than the statutory corporate income tax rate of 21 percent in the United States, and even far lower than what AbbVie paid just a few years before,” he said. AbbVie paid effective tax rates of 20 percent in 2016 and 19 percent in 2017 before the law was passed.
AbbVie was able to do all this by reporting income and registering patents in low-tax jurisdictions, Wyden cited company documents and public reports as saying.
He requested the company answer specific questions about these tax structurings and submit its answers to the Senate Finance Committee by June 16.
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