Wyden Releases Interim Report in Big Pharma Tax Investigation

Report shows AbbVie booked 99 percent of income in foreign subsidiaries, when 75 percent of sales are made in United States

Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., today released an interim report in his investigation into Big Pharma’s tax practices. Wyden’s report shows how loopholes in the tax code have allowed AbbVie, a large multinational corporation headquartered in the United States, to further abuse tax havens and avoid paying U.S. taxes on prescription drug sales. For example, more than 75 percent of AbbVie’s 2020 sales were made to American consumers, yet just 1 percent of AbbVie’s income was reported in the United States for tax purposes.

The report also details the benefits to AbbVie of the 2017 Republican tax cuts. In a letter to Wyden, AbbVie wrote, “The changes made by the 2017 tax law altered U.S. taxation on foreign earnings for U.S. corporations and have had a significant impact on AbbVie’s effective tax rate.” The committee will continue related investigations into the tax practices of other large pharmaceutical corporations, including Abbott Laboratories and Merck & Co., until it has a complete picture of the offshore tax practices of the industry.

“While Big Pharma’s game playing to avoid paying taxes is no secret, the scope of AbbVie’s tax avoidance is eye popping. We haven’t seen the scale until now. A system that allows a massively profitable company to book 99 percent of its income off-shore when 75 percent of sales are in the United States is broken,” said Wyden. “Of course, the Republican tax cuts compounded these problems, just as we predicted. It’s critical that Congress takes steps to fix this broken system, so nurses and firefighters aren’t paying higher tax rates than Big Pharma. Policies the Finance Committee has developed, including a minimum tax on corporate profits and reforms to the international tax system, would both get at this problem, and deliver on our promise to make corporations pay their fair share.”

Key findings:

The Republican tax law cut AbbVie’s effective tax rate in half. While AbbVie paid a 22 percent effective tax rate from 2015-2017, AbbVie paid stunningly low effective tax rates of 8.7 percent in 2018, 8.6 percent in 2019 and 11.2 percent in 2020. AbbVie estimates its tax rate in 2021 will be 12.5 percent.
In 2020, 99 percent of AbbVie’s taxable income was reported by offshore subsidiaries. According to data provided by AbbVie, Controlled Foreign Corporations (CFCs) reported 99 percent of AbbVie’s taxable income in 2020. This means that despite being headquartered in the United States and generating 75 percent of its sales in the United States, only 1 percent of AbbVie’s taxable income in 2020 was subject to the U.S. corporate income tax rate of 21 percent. The 99 percent of AbbVie’s income in 2020 that was reported by offshore subsidiaries was likely able to access the substantially lower GILTI rate of 10.5 percent.

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