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Pharma firms stash profits in Europe's tax havens
- rqtwteye 2y agoObviously this will all go into research.
- Bilal_io 2y agoResearch for a better villa and yacht for the CEO
- pompino 2y ago>The little-known structures in tax-friendly destinations have contributed to the 15 pharmaceutical firms amassing profits of €580 billion in the last five years. >This amount outweighs their research and development (R&D) costs, despite the industry's frequent claim that high drug prices allow them to innovate and design new drugs. R&D is one thing, but most drugs fail at the clinical trial stage. This money (hundreds of millions per drug) is just gone, unlike R&D which might result in new tech or at least a patent. For Oncology its even worse, its close to a 95% failure rate. Simply taxing companies won't make their drugs successful. Large pharma companies rely on a few blockbuster products for their profits and they milk them dry. This is standard corporate greed/behavior, but it certainly seems offputting because we're dealing with peoples lives. Personally, I think its inevitable that there is going to be some form of nationalization for a protected class of life-saving medication. https://www.labiotech.eu/trends-news/clinical-trials-success-rate/ https://www.labiotech.eu/trends-news/clinical-trials-success...
- tomrod 2y agoI might be mistaken, but don't c-corporations split out R&D (money invested back into the company) from profit? I'll admit I'm not as well read on the day-to-day reporting as I'd like to be.
- mikeyouse 2y agoProfit is what is left over after R&D - they can choose to invest those profits into future R&D, or far more frequently, just pay out the profits to owners as share buybacks or dividends.
- Aerroon 2y ago>Personally, I think its inevitable that there is going to be some form of nationalization for a protected class of life-saving medication. Wouldn't it make sense for governments to just run their own drug manufacturing company? All the drugs from expired parents are free game.
- jstanley 2y agoIt might do if they had a chance of running them efficiently.
- alan-hn 2y agoYea its a shame that public services get undermined and underfunded at every turn
- coretx 2y agoPatents are a monopoly. Efficient resource allocation is therefore impossible.
- toast0 2y agoYou could concentrate on patent expired drugs that cost the most on an annual usage basis. Yeah, that leaves out the newest meds, but you'd still make a dent, and every year, you get cooler stuff to make that's already been market tested.
- coretx 2y agoNo, because patients deserve the best or most effective drug, not the cheapest. Unless you'd like to put a price on human life that is. Also, meds don't hit the market before they are tested... Testing meds is part of the resource allocation problems because cheap & effective off-label use won't be researched & tested because there is not enough money to be made...
- alan-hn 2y ago
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- jorams 2y ago> R&D is one thing, but most drugs fail at the clinical trial stage. This money (hundreds of millions per drug) is just gone, unlike R&D which might result in new tech or at least a patent. Are you saying the clinical trial stage is somehow not part of R&D spending? It sounds like quite obviously research to me, but I'm not familiar with how it's actually reported.
- lawlessone 2y ago>This money (hundreds of millions per drug) is just gone, Is it completely wasted? we learn something doesn't work. It's not fantastic like it would be to find drugs that cure things , but we still learn.
- pompino 2y agoThe industry may learn from failures, but the shareholders of private companies want a return on their investment. I sure as heck don't want my 401k tied to oncology.
- lokar 2y agoMuch of the early development of novel new treatments is funded by venture capital and early IPOs. The big players buy them out when most of the risk is gone and it’s time to scale up.
- lnxg33k1 2y ago[flagged]
- enricotr 2y agoWhy downvote? He's saying the pure reality.
- jampekka 2y agoIt is difficult to get a man to understand something, when his salary depends on his not understanding it.
- pc86 2y ago"Neoliberalism is a cancer and populism is the cure" is not at all "pure reality."
- arp242 2y agoBecause it's 1) just a rant, which 2) is not even on-topic, to which 3) no meaningful reply can really be given.
- croes 2y agoEspecially when those people of the government at the same time raise their income because things got expensive.
- jampekka 2y agoThis is what "competitive" or "business friendly" tax policies look like. Sometimes also known as race to the bottom.
- eastbound 2y agoAs it costs almost nothing for the country to host a multinational company, there is no pushback on the minimum corporate tax. The question is, why do the countries tax something that doesn’t cost them anything to host.
- exabrial 2y agoI'm not really upset about this for a few reasons: * Taxes are excessive and out of control in the US * Most taxes just end up in lawmaker's buddy's pockets * Programs in the US get created, and never garbage collected * Literally every business is doing this Really the only thing that upsets me is that these tax havens aren't accessible to common people like me, as I'm not blood or marriage related to a US Senator or Congressional Rep.
- consp 2y agoI live in one and it is useless to me as well so don't be too sad.
- toomuchtodo 2y agoTaxes in the US are at historic lows. The emotional appeal is not compelling wrt tax evasion. Edit: https://www.concordcoalition.org/wp-content/uploads/2024/03/Tax-Rich-1-750x454.png https://www.concordcoalition.org/wp-content/uploads/2024/03/...
- coldtea 2y ago>Taxes in the US are at historic lows Given that the income tax didn't exist in the US before 1861, and even when it was introduced it was 3%, and in 1913 the highest bracket was 7% (on income over $11 million in todays's money) and the lowest was 1%, I seriously doubt that.
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- mandarax8 2y agoAnd income tax was even lower in 10'000BC !! https://www.taxpolicycenter.org/briefing-book/how-do-federal-income-tax-rates-work https://www.taxpolicycenter.org/briefing-book/how-do-federal... For our contemporary age, they are at an all time low.
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- 2OEH8eoCRo0 2y agoThey don't use the Cayman Islands like everyone else?
- popcalc 2y agoEuropean private companies do. Even Canadians have it that easy. The TCJA and being publicly listed in the States means tax-minimization strategies require a lot more creativity.
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- melenaboija 2y agoIt is a sad example the one they give, being Irish though makes me think a bit deeper. Citizens from EU not being the Netherlands or Ireland have to witness how international big corporations pay taxes in countries different to the ones they are doing their business and big local companies moving their headquarters to neighbor countries. Which benefits their citizens.
- Cthulhu_ 2y ago> how international big corporations pay taxe That's the neat part, they don't
- melenaboija 2y agoThey pay some, and the little they pay don’t go to where they belong.
- atmosx 2y agoIt’s way worse. Mediterranean countries have free education system that produce engineers, doctors, etc that they can’t keep, because they can go to the Netherlands or the UK for bigger career opportunities and salaries. At a personal level is “an amazing opportunity” at a country level it’s a vicious cycle that increases the gap, a real tragedy.
- willsmith72 2y agoi thought there was talk of Ireland finally increasing its corporate tax rates. the current situation is insane
- Theodores 2y agoAt any time we could have a change of circumstances and need the products of the big pharmaceutical companies for the rest of our lives. I feel morally obligated to keep myself fit and healthy as a personal boycott of the pharmaceutical companies. This means taking care of nutrition and being physically active. This provides no guarantee of not needing their products, however, not doing this makes it inevitable that I will need their products. It is no accident that Western democracies allow companies to park their profits in tax havens, tax havens that are typically provided security and defence by the likes of Great Britain due to former colonial ties. Sanctions should apply to countries that have these tax loop holes.
- lotsofpulp 2y ago> Sanctions should apply to countries that have these tax loop holes. Any country is free to tax any business however much it wants within its borders. If a country’s leaders choose to not tax a business, it it is up to the voters of the country to change the leaders.
- Havoc 2y ago>Delaware took the top spot with 700 entities. Europe is further west than I though
- oblio 2y agoYou mean Europe is about 248 years late, according to this article.
- Loic 2y agoFor me, this says everything: > The structures helped the company [Bristol-Myers Squibb (BMS)] reach an effective corporate tax rate of 4.7 per cent, far below the US statutory rate of 21 per cent.
- koolba 2y agoThe real answer to all of this is scrap the corporate tax rate entirely. It’s only 6% of the total revenue the government takes in anyway. The main payers are not these large corporations, it’s the little guy who can’t retain earnings year over year without paying that statutory rate. The little guy doesn’t have offshore entities and transfer pricing. And these little guys are 75% of corporate tax receipts! Scrap the whole thing and this shell game disappears.
- castrodd 2y agoYour solution to corporations using tax havens is to eliminate all corporate taxes? How does that help? They only pay 6% now, you are saying, so let's have them pay 0%?
- willcipriano 2y agoTax the shareholders instead. At a minimum tax capital gains at the same rate as labor. Ideally, don't tax labor at all either, they are taxed plenty by inflation.
- whimsicalism 2y agoi generally think we should tax people, not corporate entities. if we want to extract money from corporations, probably should just tax capital gains directly.
- eastbound 2y agoTax what you want to eliminate. Don’t tax labour. Tax pollution. Of course policy changes tend to remain half done, like Davos’ motto, and we’re left with two taxes.
- jll29 2y ago"Investigate Europe can reveal that the 15 largest European and US drugmakers, including BMS, publicly disclose over 1,300 subsidiaries in tax havens and low-tax territories. These jurisdictions offer corporations low taxes or ways to shift profits (sometimes both). In Europe, researchers and activists generally agree that they include Ireland, the Netherlands, Switzerland and Luxembourg." The nasty secret is called "transfer pricing", which is permissible under OECD rules, which permits companies to claim their headquarters are whereever they want (so they choose a low tax jurisdiction), when everybody knows that their "real headquarter" is not there (including their own Website, which names an entirely different place as their HQ). One such loophole the "Double Dutch-Irish Sandwich" was closed two years ago, but plenty of other ways remain. It is a bit unfair to "Big Pharma" (or Apple) to single them out, because lots of other corporations do the same. For example, just check the Canton Zug (CH)'s ratio between companies registered there (29k?) and people living there (25k?). I have not seen a single political party offering in their manifesto to fix this... meanwhile large corporates create shell companies owned by other shell companies licensing brands to third shell companies while receiving loans from fourth parties etc. etc. - typical money laundering patterns like organized crime, yet entirely legal at the moment. In my opinion, everyone who is a Director of >50 companies should be investigated for fraud to begin with, and rules for determining companies' true headquarter should be changed so they cannot be freely chosen "only for tax purposes".
- doikor 2y agoThere is some interest in trying to fix this. Mainly with a global minimum corporate tax rate in the OECD as this can’t really be fixed by individual countries. https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_rate https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_r... Though remains to be seen when it will actually go fully into effect and when/if all the various loop holes will be closed.
- kwhitefoot 2y ago> this can’t really be fixed by individual countries. This can't be fixed by most individual countries but there are a few individual countries that could do it. The US could easily do it, easily from a technical point of view that is; unfortunately it is politically impossible.
- blackeyeblitzar 2y agoAren’t these just standard practices that basically all multinational companies do? I’m not saying it is the right thing, but I think it is broader than just pharmaceuticals.
- lotsofpulp 2y agoIt is more clickbait-y when the title alludes to a conspiracy by one or a small group of "evil" organizations, instead of a title that allude to tax policies implemented by democratically elected leaders, which make people's eyes gloss over.
- em500 2y agoI quickly went through the 10 largest European/American biomedical companies by revenue in Google Finance (Johnson & Johnson, Roche, Merck, Pfizer, AbbVie, Bayer, Sanofi, AstraZeneca, Novartis, Bristol Meyers). AFAICT the only one that beat the SP500 in total returns in the past 5 years was AbbVie. Many even trailed short government bonds or savings account returns. So for all the eye-watering gains in tax havens the owners/shareholders didn't seem have much to show for them.
- MagnumOpus 2y agoAway from the discussion of the last 5 years being the years of LLM and AI boom and those mega caps exposed that hype driving the SP500, you didn’t list Europe’s largest company by market cap: Novo Nordisk increased 7 times in value in the last five years…
- mikysco 2y agoNovo's rise is due to the proliferation of its new blockbuster weight-loss drug, semaglutide (aka Ozempic)
- em500 2y agoYeah, I didn't do a full blown analysis, just went trough wikipedia's top 10 biochemicals by revenue (Novo Nordisk was no.14) and picked 5 years since that's the longest 1-click option from Google Finance to get a consistent time span. If you didn't predict Novo Nordisk's hit weight loss drug ahead of time, but just held a big portfolio of large pharmas, the returns seem pretty disappointing to me. Or put differently, if you have a lot of extra money to invest today, would you significantly overweight big pharma based on what we learned from this article?
- pavlov 2y agoIsn’t this why index funds exist? For an individual investor who wants unopinionated exposure to “Big Pharma” it’s hard to buy more than, say, the ten largest stocks as in your example. They’d probably also focus on American stocks only since European are typically harder to buy. And then they miss out on Novo Nordisk. But an index fund that buys (for example) the top 100 global companies in this vertical would have benefited from the rise of Novo. If you had invested one million in a fund that held Novo at only a 2% weighing five years ago, there’s now a 100k gain from that stock alone. That makes up for a lot of middling big caps, and you didn’t have to actively pick Novo or any other stock.
- ok_dad 2y agoI’m an American citizen, and no matter where I go, I owe the IRS taxes on what I make, even if the USA isn’t involved otherwise. Question: why can’t we do the same for corporations in the USA? The equivalent action might be to only allow a company to expense money spent inside the USA and thus they can’t just license themselves all their own technology and patents which are held in a one person office in Ireland. I’m sure I’m simplifying things too much, but I’m tired of the two tiered tax system where regular people pay for everything and corps reap the rewards.
- kick_in_the_dor 2y agoCounterargument: At the end of the day, the ones reaping corporate profits are themselves people, who should be paying their income taxes, no?
- exe34 2y agoand do they? if your money is in a tax haven, you don't pay income tax there. if your ghost company from the tax haven buys a private jet, you don't pay any tax on it. if you then rent it from yourself, you can call it a business expense, and deduct it from your company's profits. if you get a loan from yourself in the tax haven, that's also tax free. where does the paying income tax come in? rich people are always, legally speaking, on the brink of bankruptcy, and can't afford to pay tax.
- ffgjgf1 2y agoOr you can just move to a country with no/extremely low income taxes (well at least if you aren’t an US citizen..)
- exe34 2y ago"non-domiciled for tax purposes" as some people call it.
- balderdash 2y agoAs a us citizen that only works if you’re willing to risk a jail term
- arminiusreturns 2y agoAnybody who is interested in this topic really needs to go see this awesome documentary: The Spider's Web: Britain's Second Empire | The Secret World of Finance https://www.youtube.com/watch?v=np_ylvc8Zj8 https://www.youtube.com/watch?v=np_ylvc8Zj8 It was even done on a 4klb budget!!! The reality is that the brits realized they could no longer maintain hard power and Lionel Curtis was the primary pusher of the psyop transition to "commonwealth" soft power while maintaining all the real vestiges of empire under a false name.
- ginkgotree 2y agoA real shocker
- asdff 2y agoLike every firm in every sector, in other words. Writing this from a computer designed in california, built in china, marketed by a company incorporated in ireland.
- steveBK123 2y agoPretty sure Mag7 do the same
- jrh3 2y agoWhy is this article on HN?
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- balderdash 2y agoHow about some BMY facts ($usd thousands) Earnings before taxes: 2019 FY: 4,975,000 2020 FY:(6,871,000) 2021 FY: 8,098,000 2022 FY:7,713,000 2023 FY: 8,440,000 Taxes paid: 2019 FY: 1,515,000 2020 FY: 2,124,000 2021 FY: 1,084,000 2022 FY: 1,368,000 2023 FY: 400,000 Effective tax rate: 2019 FY: 30.45% 2020 FY:NM 2021 FY: 13.39% 2022 FY: 17.74% 2023 FY: 4.74% Average tax rate paid last five years looks closer to 29% to me…