Quote of note:
The money the companies are bringing home has come from many years of using legal loopholes in the tax law to aggressively shelter their profits from United States taxes, tax lawyers say.
Quote of note, too:
Those figures show that the drug makers have told the Internal Revenue Service for years that their profits come mainly from international sales, even though the prices of medicines are far higher in the United States and almost 60 percent of their sales take place in America.
Ah. Lies. I know what those are...
Eli Lilly noted that several factors depressed its United States profits.
I understand that, too...Big Pharma spends more on marketing than research. All that cost is applied exclusively against US revenues.
Pfizer said it was following the intent of the law.
I'm sure they are.
Anyway...
Drug Makers Reap Benefits of Tax Break
By ALEX BERENSON
A new tax break for corporations is allowing the biggest American drug makers to return as much as $75 billion in profits from international havens to the United States while paying a fraction of the normal tax rate.
The break is part of the American Jobs Creation Act, signed into law by President Bush in October, which allows companies a one-year window to return foreign profits to the United States at a 5.25 percent tax rate, compared with the standard 35 percent rate.
They're not claiming anything other than that they moved all costs to the US and significant profits to the Bahamas. They did that independent of the current law. The current law simply seeks to gain some tax revenue out of those tax-sheltered profits.
It might not make sense as a way to run the government, but you can't blame companies who play by the rules.
A far more sensible rule would eliminate corporate income taxes on all profit paid out as US taxable dividends. Then we'd see that playing by the rules for an American company meant being an American company. Observe the "S" corporation, which pays no taxes but must pay out 95% of profit as taxable dividends (which don't get a special tax rate). They basically behave normally, and do not seek to benefit from various offshore profit protection schemes. Regular corporations should be encouraged in that direction.