8 ms·

If you believe giant US companies should pay lower taxes, I have some bad news. That'll be hard, because they already pay little or no US taxes now. How much

If you believe giant US companies should pay lower taxes, I have some bad news. That'll be hard, because they already pay little or no US taxes now. How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7%. These taxes don't sound like much of a burden to me. Like most Fortune 100 firms, through legal maneuvering, Pfizer has been offshoring profits for years in order to avoid paying US taxes. At present, that has now added up to over $148B in offshored tax-free profit. Apple and most other giant US corps are little different. None are exactly being taxed into oblivion. In fact, all these firms could repatriate those monies at tax rates substantially lower than the nominal (high) tax rate. But that fact is conveniently overlooked when US corp. tax rates are publicly bemoaned. For example, I've heard there's a substantial tax savings when investing in US R&D. What's wrong with that option when repatriating profit while lowering taxes? And the sundry other imaginative ways available within existing US tax law, if CFOs weren't so damned intransigent about paying the obligatory dues of doing business in America? In the end, you can't pretend corporations like Pfizer are aggrieved innocents in the current legal stalemate of unrepatriated profits that US corporations so volubly bemoan. They knew the deal when they launched their business in this country. It's way too late to insist on changing the rules now. http://www.cnbc.com/2016/02/26/report-pfizer-dodging-35b-in-taxes.html http://www.cnbc.com/2016/02/26/report-pfizer-dodging-35b-in-... http://www.businessinsider.com/how-much-money-apple-avoids-paying-in-taxes-2014-6 http://www.businessinsider.com/how-much-money-apple-avoids-p... http://billmoyers.com/2014/05/29/10-companies-that-dodge-corporate-taxes/ http://billmoyers.com/2014/05/29/10-companies-that-dodge-cor...

Shivetya 11y ago
Regardless of what they put back into the treasury the idea that they pay any tax is absurd. They collect taxes for the treasury and this is passed on in the cost of every sale and service they make. About the only method to force payment of a tax on a sale or service is sadly through something similar to a VAT. Then remove any income tax paid. Still a better solution would be a low, 15% or such, flat tax which has no deductions
coliveira 11y ago
Also, there is a lot of people who think that companies would like to change tax laws. Here is another surprise for you: they don't. If the tax laws were a problem for them, they would have changed them already -- after all, solving big corporation problems is all that congress members do. The thing is that big companies want people to think that they pay a lot of taxes when in fact they already know how to legally evade pretty much every tax you can imagine.
- meric 11y ago
  Except the biggest one - tax on labor.
  - exclusiv 11y ago
    Yep. Many companies like Disney are getting cracked down on for hiring lots of contractors to avoid FICA and other implications with employment. Then they try to hire their contractors (at a discount of course) but the contractors tell them to piss off because they already have benefits with their staffing company and don't want to be employed by Mickey Mouse. So you have companies that want our talent but don't want to pay for it and obey the system. Something must give... The corporations will probably win, although I'm not sure yet on the best policy.
- exclusiv 11y ago
  This is not accurate. While many companies avoid taxes, they end up harboring cash overseas which has its limits. Most of them need to bring that money back to their primary market in the US - either to re-invest in more employees, factories, R&D, marketing, whatever. Carl Icanh is basically threatening Congress with Super PACs. http://www.wsj.com/articles/carl-icahn-to-invest-150-million-in-super-pac-1445441825 http://www.wsj.com/articles/carl-icahn-to-invest-150-million...
ihsw 11y ago
Why not do away with the farce that is corporate taxes, open an annual tax holiday to repatriate the obscene overseas funds, and close the gaps on source of high income (yes this is cat and mouse but let's be real, it can be better)? Honestly, we're better off bringing the money home rather than letting it fester abroad.
- mdorazio 11y ago
  To what end, though? Is there a good argument that shifting that money from a tax haven abroad to a de facto tax haven in the US will actually do something productive? It seems as though even companies that have massive amounts of domestic cash on their balance sheets are just sitting on it right now.
  - ori_b 11y ago
    > To what end, though? Is there a good argument that shifting that money from a tax haven abroad to a de facto tax haven in the US will actually do something productive? The question is whether you can couple it with incentives to either grow operations in the USA, or somehow reinvest in American companies. Potentially, this could be one of the conditions of the tax holiday, somehow.
  - exclusiv 11y ago
    I agree. Carl Icahn, activist investor, is trying to change the rules with a show of force but companies only keep it overseas because they believe they'll get their way soon. If you make it so it isn't an option, then they're forced to reinvest or lose to competitors and/or piss off shareholders with no growth. I'm all for low corporate taxes but small businesses get hosed and they create jobs and innovation despite their disadvantages. Want to start an LLC in California? You'll have to pay UPFRONT sales tax and an annual $800/yr license. People on this board complain about SaaS products that are $20/mo. What do you get from the state? Nothing. The upfront sales tax is completely ridiculous. While it's a credit - you start your company with thousands of dollars in the hole when cash is king. Then you have compliance costs and the state income & sales tax is not competitive. At least other states like Nevada and Texas can capitalize and steal talent to try and keep other states honest. That's refreshing. I have 2 successful LLCs in California but the current situation irks me. I'm closing another startup because the costs and time involved with keeping it lukewarm until I can free up time from the other 2 is prohibitive. And the cost to start it back up after I close it is prohibitive too (business tax, new sales license, distributor, etc.). Eventually I'll probably sell the 2, move to Costa Rica and start a new New-Co up. :)
matt_wulfeck 11y ago
> How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7% Yes but what did employees of these companies pay in taxes?
- mdorazio 11y ago
  The same as they would have if Pfizer and Apple were untaxed, I assume.
refurb 11y ago
How much did Pfizer pay in US taxes between 2010 and 2012? Zero. That's because Pfizer reported a net loss in 2012. I don't know the exact details, but Pfizer is headquartered in NYC and most of it's R&D is US based as well. And Pfizer had several major settlements with the IRS based on audits from previous years. That's right, the gov't audited Pfizer's returns and gave billions back.[1] [1]http://www.taxanalysts.com/www/features.nsf/Articles/8A8A34FCBD7C3C3F85257BA200497696?OpenDocument http://www.taxanalysts.com/www/features.nsf/Articles/8A8A34F...
rajacombinator 11y ago
What if I think they should pay zero taxes? Is that doable?
- tonyedgecombe 11y ago
  In some ways this is quite sensible, instead of taxing profits you tax dividends and capital gains like normal income. Shareholders tend to be less mobile than profits.
hvidgaard 11y ago
I don't know the US tax system, but I assume you have both VAT and income tax. With that assumption, why should a company pay tax of their profit? As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. When you have a system where profit is taxed, you get companies investing the money in the most risk free thing they can, to avoid the profit tax. If profit tax is 0% it's far simpler to keep the money home, and to use it when they want to.
- hollerith 11y ago
  The US does not have VAT.
- fivre 11y ago
  We don't have VAT. We have sales tax, and it varies per state and locality, and rarely makes any sense.
  - hvidgaard 11y ago
    With sales taxes, the point still stands though.
    - tstrimple 11y ago
      There is no national sales tax.
- dingaling 11y ago
  > As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. VAT-rated companies claim-back VAT again VAT-rated sales. In fact, a VAT-rated company can earn more in VAT rebates than it collects in sales. The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.
GreaterFool 11y ago
I believe a distinction should be drawn between: (1) stashing income derived in US somewhere offshore (2) not repatriating income derived outside US back to US If doing (2) entails additional taxes, why would rational multi-national corporation do that? Because America? The solution is to revise the tax code in such a way that income derived and taxed elsewhere would not be taxed again. Take Apple for instance; they have a giant pile of cash that sits in bank accounts all over the world. Why should they move it back to US, pay huge taxes and let it sit in bank account back in US? That's irrational. There are other issues involved: what are the actual tax rates companies are paying (too low!) and tax dodging all over the world (happens all the time! didn't Google just settle with EU?) but they are somewhat orthogonal. The main issue is that US will tax one's profits again once they are moved back to US. Even if they profits are legally derived in another country and taxed in that country.
- jib 11y ago
  Derived is not a simple proposition for multinationals. The IPad I'm writing this on was assembled in China, sold in Ireland, using code developed in the US, where the rights to that code are held in Ireland (I believe). Each of those countries (and many more I am sure) contributed to the sale. Where was that income derived? Add to that different tax laws in terms of accountability and you have our mess.
  - thepangolino 11y ago
    IP rights are most likely heals in the Netherlands. Possibly in Belgium or Luxembourg.
wtbob 11y ago
> How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7%. That would be because Pfizer legally had no profits. Apple has a 15-39% tax rate (almost certainly closer to the latter), not a 3.7% tax rate, because that's the law in the U.S. > Like most Fortune 100 firms, through legal maneuvering, Pfizer has been offshoring profits for years in order to avoid paying US taxes. They do this because U.S. corporate taxes are absurdly high. Of course, it's only convenient for large multinationals to avoid taxes in this fashion; those same high rates bite their smaller competitors badly, making them far less profitable (imagine having to pay nearly half of your profits in taxes annually!). The situation works out well enough for the large companies.
- lmm 11y ago
  > They do this because U.S. corporate taxes are absurdly high. Oh really? So places with a sane corporate tax rate, like Ireland's 12%, see less tax avoidance by large multinationals headquartered there, do they?
- dforrestwilson 11y ago
  There's another angle to consider here as well. How much do EPS and tax profits mean to investors? Very little so long as underlying cash flow is strong. The new game for corporations has been to minimize their taxable profits while maximizing free cash flow and returning that cash somehow to shareholders. John Malone's cable companies have reported losses or minimal profits for decades, while at the same time beating the S&P500. Part of that was due to favorable tax breaks on cable companies which purchased and sold cable system assets between one another. This was originally designed to support cable in rural communities, but was quickly co-opted. Competitors would frequently sell assets to each other every couple of years when the tax benefits ran out to re-roll them. One big shell game. The code is broken and until we fix it the opportunities to game the system are going to multiply. Something about a finger in the dike...
- deleted 11y ago
  [deleted]
- makomk 11y ago
makecheck 11y ago
And when people talk about how companies skirt taxes, there is rarely any discussion about the major costs to the livelihoods of the people doing this financial work. It isn’t just about finding creative ways to not pay money, it is about companies practically working their tax accountants to death in order to do it. I knew someone who worked in taxes for a huge company and it was utterly insane: he worked, nearly literally, all the time: like 6 am to midnight, 7 days a week, for the entire damned quarter. Then the company thinks they’re doing them some kind of favor by giving them like ONE day off before they start feeling pressure to begin work on the next quarter’s numbers. All about the numbers. He described all these tricks used to shuffle things around the world. And those people were suffering mentally as well: I heard about constant screaming matches at work, colleagues on average ending their relationships in divorce, etc.
- ivanca 11y ago
  It's certainly an important issue but it has nothing to do with the matter at hand, but with labour laws and their enforcement. Any employee can be abused if they have no means of protection.
  - baltcode 11y ago
    Why was this comment down-voted? Software developers, assembly line workers, cashiers can all be worked to death. It's a function of labour laws, supply and demand, and culture rather than tax laws.
jayess 11y ago
Nice cherry picking. According to Pfizer's actual SEC filings, for 2015, 2014, and 2013, the company paid 22%, 25%, and 27% respectively. http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1hSFIwY0RvdkwyRndhUzUwWlc1cmQybDZZWEprTG1OdmJTOWtiM2R1Ykc5aFpDNXdhSEEvWVdOMGFXOXVQVkJFUmlacGNHRm5aVDB4TURjNE16STJOaVp6ZFdKemFXUTlOVGM9JnR5cGU9MiZmbj0xMDc4MzI2Ni5wZGY= http://services.corporate-ir.net/SEC/Document.Service?id=P3V...
stult 11y ago
>For example, I've heard there's a substantial tax savings when investing in US R&D. Yeah, but not that much savings. The calculation is complicated, but taxpayers usually don't recuperate more than 5-10% of their qualified research expenditures for the tax year. Not to mention the difficulty in evaluating and calculating precisely what business components qualify for the credit. Most firms spend only a fraction of their revenue on qualified research activities, so their profits generally dwarf QREs. Pfizer would have to spend something like a trillion dollars on R&D in order to repatriate all of their current offshore profits without paying any tax on it. Let's take a concrete example. I'll use the regular research credit calculation since they've been in business long enough and have enough base years. They currently spend around $6.5bn on R&D, that's down from an average of $8bn in the prior five years. Let's assume all of that is qualified, even though it very well might not be due to the large number of exclusions in IRC sections 41 and 174. I'm too lazy to look up Pfizer's aggregate gross receipts in their financial reports, but a quick google search shows their annual revenue at around $50bn, which should be close enough and I'll pretend that's been consistent for the five preceding years. That's $8bn * 5 base years = $40bn aggregate base year QREs. Divided by $250bn base year aggregate gross receipts gives us a fixed based percentage of 16%, which happens to be the maximum allowable amount. We multiply that by the average aggregate gross receipts for the base years, giving us a base amount of $8bn. We then select the greater of the base amount or 50% of current year QREs ($3.25bn), so we pick the base amount. We then can take the credit for 20% of the excess of the current year QREs over the base amount, which in this case is negative $1.5bn, so Pfizer can't claim the credit at all. Even if we were to fudge the numbers more optimistically in Pfizer's favor, they are looking at a best case tax credit in the range of a few hundred million dollars, when they have a couple hundred billion in profits that they need to repatriate. In order to repatriate that much money without paying taxes, Pfizer would need to incur massive losses. There simply aren't enough tax "loopholes" for Pfzier to deduct or credit its way to a zero tax rate.

Shivetya 11y ago

Regardless of what they put back into the treasury the idea that they pay any tax is absurd. They collect taxes for the treasury and this is passed on in the cost of every sale and service they make. About the only method to force payment of a tax on a sale or service is sadly through something similar to a VAT. Then remove any income tax paid. Still a better solution would be a low, 15% or such, flat tax which has no deductions

coliveira 11y ago

Also, there is a lot of people who think that companies would like to change tax laws. Here is another surprise for you: they don't. If the tax laws were a problem for them, they would have changed them already -- after all, solving big corporation problems is all that congress members do. The thing is that big companies want people to think that they pay a lot of taxes when in fact they already know how to legally evade pretty much every tax you can imagine.

meric 11y ago
Except the biggest one - tax on labor.
- exclusiv 11y ago
  Yep. Many companies like Disney are getting cracked down on for hiring lots of contractors to avoid FICA and other implications with employment. Then they try to hire their contractors (at a discount of course) but the contractors tell them to piss off because they already have benefits with their staffing company and don't want to be employed by Mickey Mouse. So you have companies that want our talent but don't want to pay for it and obey the system. Something must give... The corporations will probably win, although I'm not sure yet on the best policy.
exclusiv 11y ago
This is not accurate. While many companies avoid taxes, they end up harboring cash overseas which has its limits. Most of them need to bring that money back to their primary market in the US - either to re-invest in more employees, factories, R&D, marketing, whatever. Carl Icanh is basically threatening Congress with Super PACs. http://www.wsj.com/articles/carl-icahn-to-invest-150-million-in-super-pac-1445441825 http://www.wsj.com/articles/carl-icahn-to-invest-150-million...

ihsw 11y ago

Why not do away with the farce that is corporate taxes, open an annual tax holiday to repatriate the obscene overseas funds, and close the gaps on source of high income (yes this is cat and mouse but let's be real, it can be better)? Honestly, we're better off bringing the money home rather than letting it fester abroad.

mdorazio 11y ago
To what end, though? Is there a good argument that shifting that money from a tax haven abroad to a de facto tax haven in the US will actually do something productive? It seems as though even companies that have massive amounts of domestic cash on their balance sheets are just sitting on it right now.
- ori_b 11y ago
  > To what end, though? Is there a good argument that shifting that money from a tax haven abroad to a de facto tax haven in the US will actually do something productive? The question is whether you can couple it with incentives to either grow operations in the USA, or somehow reinvest in American companies. Potentially, this could be one of the conditions of the tax holiday, somehow.
- exclusiv 11y ago
  I agree. Carl Icahn, activist investor, is trying to change the rules with a show of force but companies only keep it overseas because they believe they'll get their way soon. If you make it so it isn't an option, then they're forced to reinvest or lose to competitors and/or piss off shareholders with no growth. I'm all for low corporate taxes but small businesses get hosed and they create jobs and innovation despite their disadvantages. Want to start an LLC in California? You'll have to pay UPFRONT sales tax and an annual $800/yr license. People on this board complain about SaaS products that are $20/mo. What do you get from the state? Nothing. The upfront sales tax is completely ridiculous. While it's a credit - you start your company with thousands of dollars in the hole when cash is king. Then you have compliance costs and the state income & sales tax is not competitive. At least other states like Nevada and Texas can capitalize and steal talent to try and keep other states honest. That's refreshing. I have 2 successful LLCs in California but the current situation irks me. I'm closing another startup because the costs and time involved with keeping it lukewarm until I can free up time from the other 2 is prohibitive. And the cost to start it back up after I close it is prohibitive too (business tax, new sales license, distributor, etc.). Eventually I'll probably sell the 2, move to Costa Rica and start a new New-Co up. :)

matt_wulfeck 11y ago

> How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7% Yes but what did employees of these companies pay in taxes?

mdorazio 11y ago
The same as they would have if Pfizer and Apple were untaxed, I assume.

refurb 11y ago

How much did Pfizer pay in US taxes between 2010 and 2012? Zero. That's because Pfizer reported a net loss in 2012. I don't know the exact details, but Pfizer is headquartered in NYC and most of it's R&D is US based as well. And Pfizer had several major settlements with the IRS based on audits from previous years. That's right, the gov't audited Pfizer's returns and gave billions back.[1] [1]http://www.taxanalysts.com/www/features.nsf/Articles/8A8A34FCBD7C3C3F85257BA200497696?OpenDocument http://www.taxanalysts.com/www/features.nsf/Articles/8A8A34F...

rajacombinator 11y ago

What if I think they should pay zero taxes? Is that doable?

tonyedgecombe 11y ago
In some ways this is quite sensible, instead of taxing profits you tax dividends and capital gains like normal income. Shareholders tend to be less mobile than profits.

hvidgaard 11y ago

I don't know the US tax system, but I assume you have both VAT and income tax. With that assumption, why should a company pay tax of their profit? As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. When you have a system where profit is taxed, you get companies investing the money in the most risk free thing they can, to avoid the profit tax. If profit tax is 0% it's far simpler to keep the money home, and to use it when they want to.

hollerith 11y ago
The US does not have VAT.
fivre 11y ago
We don't have VAT. We have sales tax, and it varies per state and locality, and rarely makes any sense.
- hvidgaard 11y ago
  With sales taxes, the point still stands though.
  - tstrimple 11y ago
    There is no national sales tax.
dingaling 11y ago
> As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. VAT-rated companies claim-back VAT again VAT-rated sales. In fact, a VAT-rated company can earn more in VAT rebates than it collects in sales. The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.

GreaterFool 11y ago

I believe a distinction should be drawn between: (1) stashing income derived in US somewhere offshore (2) not repatriating income derived outside US back to US If doing (2) entails additional taxes, why would rational multi-national corporation do that? Because America? The solution is to revise the tax code in such a way that income derived and taxed elsewhere would not be taxed again. Take Apple for instance; they have a giant pile of cash that sits in bank accounts all over the world. Why should they move it back to US, pay huge taxes and let it sit in bank account back in US? That's irrational. There are other issues involved: what are the actual tax rates companies are paying (too low!) and tax dodging all over the world (happens all the time! didn't Google just settle with EU?) but they are somewhat orthogonal. The main issue is that US will tax one's profits again once they are moved back to US. Even if they profits are legally derived in another country and taxed in that country.

jib 11y ago
Derived is not a simple proposition for multinationals. The IPad I'm writing this on was assembled in China, sold in Ireland, using code developed in the US, where the rights to that code are held in Ireland (I believe). Each of those countries (and many more I am sure) contributed to the sale. Where was that income derived? Add to that different tax laws in terms of accountability and you have our mess.
- thepangolino 11y ago
  IP rights are most likely heals in the Netherlands. Possibly in Belgium or Luxembourg.

wtbob 11y ago

> How much did Pfizer pay in US taxes between 2010 and 2012? Zero. What was Apple's US tax rate in 2014? 3.7%. That would be because Pfizer legally had no profits. Apple has a 15-39% tax rate (almost certainly closer to the latter), not a 3.7% tax rate, because that's the law in the U.S. > Like most Fortune 100 firms, through legal maneuvering, Pfizer has been offshoring profits for years in order to avoid paying US taxes. They do this because U.S. corporate taxes are absurdly high. Of course, it's only convenient for large multinationals to avoid taxes in this fashion; those same high rates bite their smaller competitors badly, making them far less profitable (imagine having to pay nearly half of your profits in taxes annually!). The situation works out well enough for the large companies.

lmm 11y ago
> They do this because U.S. corporate taxes are absurdly high. Oh really? So places with a sane corporate tax rate, like Ireland's 12%, see less tax avoidance by large multinationals headquartered there, do they?
dforrestwilson 11y ago
There's another angle to consider here as well. How much do EPS and tax profits mean to investors? Very little so long as underlying cash flow is strong. The new game for corporations has been to minimize their taxable profits while maximizing free cash flow and returning that cash somehow to shareholders. John Malone's cable companies have reported losses or minimal profits for decades, while at the same time beating the S&P500. Part of that was due to favorable tax breaks on cable companies which purchased and sold cable system assets between one another. This was originally designed to support cable in rural communities, but was quickly co-opted. Competitors would frequently sell assets to each other every couple of years when the tax benefits ran out to re-roll them. One big shell game. The code is broken and until we fix it the opportunities to game the system are going to multiply. Something about a finger in the dike...
deleted 11y ago
[deleted]
makomk 11y ago

makecheck 11y ago

And when people talk about how companies skirt taxes, there is rarely any discussion about the major costs to the livelihoods of the people doing this financial work. It isn’t just about finding creative ways to not pay money, it is about companies practically working their tax accountants to death in order to do it. I knew someone who worked in taxes for a huge company and it was utterly insane: he worked, nearly literally, all the time: like 6 am to midnight, 7 days a week, for the entire damned quarter. Then the company thinks they’re doing them some kind of favor by giving them like ONE day off before they start feeling pressure to begin work on the next quarter’s numbers. All about the numbers. He described all these tricks used to shuffle things around the world. And those people were suffering mentally as well: I heard about constant screaming matches at work, colleagues on average ending their relationships in divorce, etc.

ivanca 11y ago
It's certainly an important issue but it has nothing to do with the matter at hand, but with labour laws and their enforcement. Any employee can be abused if they have no means of protection.
- baltcode 11y ago
  Why was this comment down-voted? Software developers, assembly line workers, cashiers can all be worked to death. It's a function of labour laws, supply and demand, and culture rather than tax laws.

jayess 11y ago

Nice cherry picking. According to Pfizer's actual SEC filings, for 2015, 2014, and 2013, the company paid 22%, 25%, and 27% respectively. http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1hSFIwY0RvdkwyRndhUzUwWlc1cmQybDZZWEprTG1OdmJTOWtiM2R1Ykc5aFpDNXdhSEEvWVdOMGFXOXVQVkJFUmlacGNHRm5aVDB4TURjNE16STJOaVp6ZFdKemFXUTlOVGM9JnR5cGU9MiZmbj0xMDc4MzI2Ni5wZGY= http://services.corporate-ir.net/SEC/Document.Service?id=P3V...

stult 11y ago

>For example, I've heard there's a substantial tax savings when investing in US R&D. Yeah, but not that much savings. The calculation is complicated, but taxpayers usually don't recuperate more than 5-10% of their qualified research expenditures for the tax year. Not to mention the difficulty in evaluating and calculating precisely what business components qualify for the credit. Most firms spend only a fraction of their revenue on qualified research activities, so their profits generally dwarf QREs. Pfizer would have to spend something like a trillion dollars on R&D in order to repatriate all of their current offshore profits without paying any tax on it. Let's take a concrete example. I'll use the regular research credit calculation since they've been in business long enough and have enough base years. They currently spend around $6.5bn on R&D, that's down from an average of $8bn in the prior five years. Let's assume all of that is qualified, even though it very well might not be due to the large number of exclusions in IRC sections 41 and 174. I'm too lazy to look up Pfizer's aggregate gross receipts in their financial reports, but a quick google search shows their annual revenue at around $50bn, which should be close enough and I'll pretend that's been consistent for the five preceding years. That's $8bn * 5 base years = $40bn aggregate base year QREs. Divided by $250bn base year aggregate gross receipts gives us a fixed based percentage of 16%, which happens to be the maximum allowable amount. We multiply that by the average aggregate gross receipts for the base years, giving us a base amount of $8bn. We then select the greater of the base amount or 50% of current year QREs ($3.25bn), so we pick the base amount. We then can take the credit for 20% of the excess of the current year QREs over the base amount, which in this case is negative $1.5bn, so Pfizer can't claim the credit at all. Even if we were to fudge the numbers more optimistically in Pfizer's favor, they are looking at a best case tax credit in the range of a few hundred million dollars, when they have a couple hundred billion in profits that they need to repatriate. In order to repatriate that much money without paying taxes, Pfizer would need to incur massive losses. There simply aren't enough tax "loopholes" for Pfzier to deduct or credit its way to a zero tax rate.