8 ms·

Time to End Roundtripping by Big Pharma

112 points by luu 1y ago

pstuart 1y ago
This would be wonderful to have happen but the current regime does not engender hope in tax reform that serves the country rather than the rich who own it.
Guid_NewGuid 1y ago
It was interesting to read how much of the US drugs market relies on imports. The article deals with the high value stuff. However, by volume, 90% of drugs used in the US are cheaper generics often with no US manufacturers. The US is heavily reliant on India and ultimately China for both active pharmaceutical ingredients and key starting materials. With 80% of Indian production using starting materials from China.[0] The US had no domestic production of penicillin between 2004[3] when its last plant shuttered until 2021 when a factory reopened.[1] (source 1 and 3 appear to contradict, the 2019 testimony states there was no manufacturer after 2004 whereas it sounds like the plant closed in 2020, regardless the domestic capability is extremely weak) As usual for American sources this is painted as some nefarious scheme by the evil red Chinese to destroy America by making cheaper drugs available. To add my own editorialising I think US companies are easily capable of ruining US manufacturing and focusing on screwing US patients over.[2] The average citizen should probably be glad of low cost Chinese supply, but nurturing domestic capability as per Biden is sensible. [0]: https://prosperousamerica.org/skyrocketing-pharmaceutical-imports-to-the-u-s-endanger-national-security/ https://prosperousamerica.org/skyrocketing-pharmaceutical-im... [1]: https://www.fiercepharma.com/manufacturing/reopening-penicillin-plant-tennessee-jackson-healthcare-relieves-u-s-dependence-china https://www.fiercepharma.com/manufacturing/reopening-penicil... [2]: https://www.rand.org/news/press/2024/02/01/index1.html https://www.rand.org/news/press/2024/02/01/index1.html [3]: https://www.uscc.gov/sites/default/files/RosemaryGibsonTestimonyUSCCJuly152019.pdf https://www.uscc.gov/sites/default/files/RosemaryGibsonTesti... [4]: sources per https://youtu.be/hS0-ugYA-ko?si=xCNzctCGr9f2M7ct https://youtu.be/hS0-ugYA-ko?si=xCNzctCGr9f2M7ct
- reactordev 1y ago
  It’s so ironic. Just a couple weeks ago he was touting how he’s getting drug prices down. Except the tariffs kicked in, and now we’re going to be paying 50% more for those generics. If this were a chess move, we just lost our rooks.
  - herbst 1y ago
    He claimed to bring prices down while (not after or before) increasing prices for meds from Switzerland for his people. With very little consequences on the Swiss market. He lied, obviously.
  - Incipient 1y ago
    To continue the analogy, if the US lost a rook, everyone would take notice "damn that was a big blow". I think it's more like losing a pawn. Except now others have taken 3 unanswered pawns and everyone said "eh we've still got our queen" but now the queens are looking shaky and you're staring down a 3 pawn short endgame and no one believes you can turn it around.
    - reactordev 1y ago
      Praying your opponent makes a mistake great analogy.
  - lenkite 1y ago
    Actually iPhone, Pharma and RING BELLS Processed Petroleum Products exported by India are currently exempt from US import tariffs. US wants to punish India for importing Russian oil - except when US themselves are consumers of that processed Russian oil.
- herbst 1y ago
  Wait the evil Chinese made drugs cheaper? That's evil!!!
- deleted 1y ago
  [deleted]
Fordec 1y ago
> The tax strategies these companies use are known Links to an article from 2017 about a tax loophole that was closed in 2020 [0]. As an Economist that by his Wikipedia article [1] dedicates so much of his time talking about the Irish tax regime, he should be well aware of this fact. [0] https://budgetmodel.wharton.upenn.edu/issues/2024/10/14/the-end-of-the-double-irish https://budgetmodel.wharton.upenn.edu/issues/2024/10/14/the-... [1] https://en.wikipedia.org/wiki/Brad_W._Setser https://en.wikipedia.org/wiki/Brad_W._Setser
- muststopmyths 1y ago
  You are talking about the "Double Irish", which was scotched (sorry) in 2020 by Ireland. The link under your quoted line in the TFA seems to be talking about Apple (and others) preparing for the end of the Double Irish by finding other tax havens. "Elite tax advisers help Apple Inc. and other corporate giants skirt impacts of crackdown on 'Double Irish' maneuvers." So, I don't see what's invalid about the TFA's point, which is about tax avoidance in general
- refurb 1y ago
  Yup, this article isn't great. As someone close to pharmaceutical manufacturing, the reason why the manufacturing is done in Ireland is for tax benefits for sales in Europe. So why not have a US factory for US sales? Because it's much more expensive and complex to have two separate factories making the same drug. It's far easier to just scale the Irish factory to serve all global sales. Even the same companies with Irish factories have US factories as well. It's not like any tax benefit moved that out of the US as well.
  - kgwgk 1y ago
    Most of the value is in the patents, not in the manufacturing. Did they also expatriate that “accidentally”? If Pfizer operates in the US at a loss (or at least they did in 2018-2020) and all the profits are booked elsewhere it was their choice. https://www.finance.senate.gov/imo/media/doc/wyden_pfizer_investigation_report_final_march_2025pdf.pdf https://www.finance.senate.gov/imo/media/doc/wyden_pfizer_in...
rr808 1y ago
If you think that is bad wait and see what big tech companies do in Ireland.
- mikepurvis 1y ago
  Is that still going on? I was just reading about it in the Sarah Wynn-Williams book and it sounded like the EU was cracking down on it and bunch of execs were making backroom deals at Davos in the late 2010s to try to get extensions and sweetheart deals of various kinds. EDIT: Sigh, yeah looks like the famous Double Irish loophole closed in 2020, but there's another scheme that's come up since 2021: https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
  - extraduder_ire 1y ago
    Ireland's been party to the GMCT agreement[0] since the end of 2023, so singling us out doesn’t make much sense anymore. Earlier this year the US withdrew from it, which complicates matters. Run of the mill tax avoidance strategies continue worldwide. 0: https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_rate https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_r...
BenFranklin100 1y ago
Corporate taxes are blunt instruments. They preferentially hurt workers. The C-suite decides how higher corporate taxes affect the company, and it’s not by lowering the CEO’s salary. It’s by firing people, hiring less, and making less investments in the business all else being equal. Corporate taxes also distort decisions of small business owners, who will pay out profits as salary to themselves rather than reinvesting the money in the company so as to avoid paying taxes on profits twice, first as a corporate tax and the second time as an income tax. A better solution is to slash corporate taxes and raise income taxes on high earners. This will end the practice of offshoring the story describes, and also spare workers the negative effects of corporate income taxes.
- shoo 1y ago
  Australia has another (strange?) solution: Australian public companies pay tax and issue dividends to shareholders. these dividend payments have attached tax credits ("franking credits") that can be used by the shareholder to reduce their income tax, so those dividend payments are not subject to double taxation (being subject to company tax and again to the individual shareholder's income tax). E.g. suppose you are a shareholder and receive a dividend of $1000 from some australian public company. If the australian company is large it will be subject to a 30% corporate tax rate. If the company paid company tax on earnings before issuing the dividend, then that dividend comes with a $(1000 / 0.7) * 0.3 = $428.57 tax credit which the shareholder can use to reduce their income tax bill. That said, in terms of the global landscape of low tax jurisdictions, Australia's corporate tax rate of 30% and highest marginal individual income tax rate of 47% make things less attractive.
  - BenFranklin100 1y ago
    Interesting, thanks. I didn’t know about that. I could see how a version of that might address the double taxation problem small business owners face that I described.
- themafia 1y ago
  > It’s by firing people, hiring less, and making less investments in the business all else being equal. This is farcical. The universal response to higher taxes is to create less revenue? Exactly how does this benefit the CEOs salary? Or improve outcomes for shareholders? > who will pay out profits as salary to themselves rather than reinvesting the money in the company so as to avoid paying taxes on profits twice The IRS keeps an eye on this. The business owner does not have unlimited runway and the salary selected must be reasonable. It's also not the only tax vehicle available to the owner to reduce or eliminate the "double taxation" that can occur on profit distributions. There's like half a dozen ways to solve this problem from an ownership perspective. It should also be noted that the personal income tax rate and the capital gains tax rate are likely to offer very different outcomes for the owner. It's hardly as cut and dry as you project. > A better solution is to slash corporate taxes and raise income taxes on high earners. So the corporations engage in practices like buybacks and overfund the business and workers wages end up artificially depressed? A better solution is to examine the problem and respond with appropriately designed policies that are outcome oriented. These "quick fix" and "slash and burn" policies are _precisely_ how we ended up here. Swinging the pendulum all the way to the other extreme creates the same amount of misery just in a different direction.
daft_pink 1y ago
Seems like the tariffs are having their intended effect.
judge123 1y ago
Is this 'round-tripping' thing just a fancy term for why my parents' medication costs more than a car payment? Just trying to connect the dots from their balance sheet to my wallet.
- readthenotes1 1y ago
  Not at all. It only explains why a pharmaceutical company has an overseas office. Your parents medication cost more than a car payment because there's no motivation in the US system to reduce prices for most drugs. Quite the opposite for insurers who provide ACA--they're actually incentivized to increase the cost of care so that the 20% they are allowed to spend on marketing, executive compensation, etc can grow as well.
  - zamadatix 1y ago
    I can't tell if this is trying to say the ACA should have set it to 0% so there is no incentive, if there is supposed to be something special about 20% which makes executives greedy but at 100% they'd have no interest in trying to make a bigger bonus, or if I'm missing something else completely. I feel like it has to be the latter, I just can't figure out what.
    - rolisz 1y ago
      I think it's implying that it gives an incentive to make things more expensive, because then they can make more money. If that profit cap didn't exist, they could make more money in other ways, such as lowering costs but keeping prices the same (or lowering them less).
      - Auracle 1y ago
        Exactly. I firmly believe that was a poison pill put in the bill to try and eventually push insurance prices so high that Americans would acquiesce to single payer. The alternatives are the bill’s authors were so stupid they didn’t see the negatives to that action, they thought it would play well to voters and the rest be damned, or the some big medical players got it put in - which would be risky, considering option A. But yeah, with that in place they have no incentive to pay out less - they simply can’t have it raise higher than their competitors too quickly. I feel like Republicans would have made a bill just to get rid of that one portion but the voters would hate it so much they can’t because people’s grasp on economics is too simple.
cycomanic 1y ago
Can someone explain why the Netherlands are included in the graph of low tax juristictions? As far as I know their corporate tax rate is 25.8% which is larger than the 21% us rate.
- ExoticPearTree 1y ago
  I think it has to do with the fact that you can export tge profit to friendlier jurisdictions afterwards. For this reason a lot of tech companies have subsidiaries in the Nerherlands. Uber is the first example that comes to mind. All card charges when you take an Uber in Europe are to Uber N.V - which is a Dutch Entity.
- terminalshort 1y ago
  25.8% of what? Tax loopholes operate on calculating that, not lowering the percentage.
- hdgvhicv 1y ago
  Way under personal tax rates though, and it’s taxed on profit not revenue
- bux93 1y ago
  Those corporate taxes are only paid by small companies. The Netherland has a decades old strategy of being "business friendly" - if you're a huge corporate. This culminates in two things. One, The Netherlands has the most tax treaties of any country. This creates many loopholes. Two, The Netherlands Tax Authority will happily help you take advantage of those. You just have to call them up and say "I plan to sell and lease back some IP through Swasiland, is that OK?" and they will tell you up front whether the loophole you found is OK to use - it's called a "ruling" and it's binding to them. This takes away any concern your tax lawyers might have about being thrown in jail for being too creative. The basic idea is that The Netherlands would rather help a big corporate avoid paying 10% tax in another country, if it means they pay 1% in The Netherlands. Or even 0% corporate taxes and only some payroll tax for the people working at the Dutch office (job creation for tax lawyers who, as established earlier, lead a stress-free life). A while back, some executives from the Shell oil company appeared on Dutch television proudly saying "of course we don't pay taxes! Why else would our HQ be here?". This was a bit too rich even for the Dutch viewers, and Shell ended up moving to the UK, presumably after some of their tax rulings got a second look due to political pressure. Unilever similarly left to the UK (who were also giving out tax deals like candy after Brexit ruined their economy). Note that the author is conflating The Netherlands being a tax haven (which it is) with the location pharmaceuticals are produced. To take advantage of Dutch tax avoidance strategies, most companies focus on intellectual property; this is why your IKEA pitches has "copyright InterIKEA systems B.V." printed on it. Made in some low wage country, but the license fees for its design are paid to a Dutch for-profit company owned by a non-profit(?) foundation. In other words, it's easier to produce pharmaceuticals in, say, the Phillipines, and then do some shady (well, pre-approved) accounting to make taxable income disappear into thin air. There's also going to be some importing and re-exporting going on (guess which EU country is home to its biggest port, despite being a tiny country). Nevertheless, pharma production - or rather "life sciences" - in The Netherlands is one of the governments 9 focus industries. This policy is focused mostly on high-value add activities like R&D rather than production. This will also skew the numbers.
aDyslecticCrow 1y ago
> according to U.S. trade data, equivalent to the weight of less than four Tesla Cybertrucks Americans will truly use anything but the metric system.
- _Algernon_ 1y ago
  Similes don't exist in Europe?
  - ChrisMarshallNY 1y ago
    Is the UK still considered part of Europe? https://www.theregister.com/Design/page/reg-standards-converter.html https://www.theregister.com/Design/page/reg-standards-conver...
- deleted 1y ago
  [deleted]
khalic 1y ago
And there we go, people actually using “trade imbalance” as a valid economical concept. If you let clown dictate your vocabulary, you’ll be spitting confettis in no time. Please be smarter than this. There is no such thing as trade imbalance, it’s called trade, if you have more money, you buy more.
- herbst 1y ago
  It's not only funny as f but also scary and sad to see people who could be smarter than this falling for orange man and his words and actually dare to repeat them internationally, not only confusing everyone that doesn't know about Americas misleaded ideas but also enforcing the idea that any of this makes any sense anywhere else than in orange mans head.
- blauditore 1y ago
  Well, more money flows in one direction in such cases, which might or might not be intended. As long as there's enough influx of money from other places, this can even be long-term sustainable (e.g. a triangle of trade). It seems that China is currently a "sink" in the global flow of money, which will obviously change the landscape in the long run. How? Hard to tell, probably not in such a bad as many people fear. I think it will eventually drive up prices of Chinese export goods, which will force importers to look for alternatives, which is likely better in many regards than having one country manufacturing everything for everyone in the world. But don't trust me, I'm just a random poster on the internet.
  - khalic 1y ago
    The issue is the framing itself, calling it an imbalance or deficit, when it’s way more complicated than this. It’s a really good strategy to frame the issue in your advantage. Doesn’t make it useful or meaningful
- stogot 1y ago
  Some export more. Some import more. Some want to be the opposite. If you’re in that position, you’d consider yourself out of balance
jmyeet 1y ago
I firmly believe we need revenue apportionment of profits. By this I mean that if you have $100 billion in revenue and $80 billion in costs then you have $20 billion in profits. If half that revenue ($50 billion) comes from sales in the US then half that profit ($10 billion) is taxable US income. You might be tempted to argue they'll use subsidiaries to shift profits but we already have ways of dealing with that. We also have earnings that get reported to financial markets so you can always use the baseline revenue and earnings numbers from that. We have ways too of dealing with transfer pricing and profit-shifting. How far do companies get if they can't report earnings to the markets? Or if they try and tank earnings to reduce their tax liability? You might be tempted to ask "what about private companies?" Subject them to the same reporting standards and auditing requirements of any US-listed company or they don't get access to the US market. This idea that companies can't be taxed because they're too clever needs to die. So does the idea that they shouldn't be taxed. Governments, particularly the US government and the EU, wield extraordinary power. You can bring companies to heel by withholding access to a market pretty quickly. It's why I always laugh when companies threaten to abandon a market. As long as there is profit to be made, a company will never leave. Non-IP assets can't generally be picked and moved so you always hold sway over a significant portion of their assets. And the US has the additional power to withhold access essentially to the global financial system. And of course governments always have the option of nationalizing industries. Governments should serve the interests of their citizens and corporations should serve the interests of those governments. Governments should not be subservient to corporate interests. Unfortunately, the US government at this point is basically just six companies in a trenchcoat.
- tossandthrow 1y ago
  This would heavily encourage exports and disalign the company's incentives with the nation's. I do, however, this could be a good idea. But I think the true issue is that we need a globally unified tax framework (and serious retaliation if a nation decides not to adopt it).
  - DebtDeflation 1y ago
    100%. All of these schemes depend on the existence of a jurisdiction with low (or non-existent) corporate taxes that they can shift profits to in order to avoid paying taxes in the actual jurisdictions in which they manufacture and sell. Doesn't matter whether at its core it's a transfer pricing scheme, an IP royalty scheme, or a thin capitalization scheme. You need a man (country) in the middle with low/no taxes where you will recognize the profit you don't want taxed.
tracker1 1y ago
I've said repeatedly, that medications and medical equipment should have a requirement of at least 50% domestic production (end to end) and dual sourcing in the US. Just from a security standpoint. That should have been the lesson of the COVID pandemic. I feel similarly for infrastructure and communications as well.
Arturo525 1y ago
Brilliant. Make big pharma pay more taxes and watch drug prices soar.Thimk.

112 points by luu 1y ago

This would be wonderful to have happen but the current regime does not engender hope in tax reform that serves the country rather than the rich who own it.

Guid_NewGuid 1y ago

It was interesting to read how much of the US drugs market relies on imports. The article deals with the high value stuff. However, by volume, 90% of drugs used in the US are cheaper generics often with no US manufacturers. The US is heavily reliant on India and ultimately China for both active pharmaceutical ingredients and key starting materials. With 80% of Indian production using starting materials from China.[0] The US had no domestic production of penicillin between 2004[3] when its last plant shuttered until 2021 when a factory reopened.[1] (source 1 and 3 appear to contradict, the 2019 testimony states there was no manufacturer after 2004 whereas it sounds like the plant closed in 2020, regardless the domestic capability is extremely weak) As usual for American sources this is painted as some nefarious scheme by the evil red Chinese to destroy America by making cheaper drugs available. To add my own editorialising I think US companies are easily capable of ruining US manufacturing and focusing on screwing US patients over.[2] The average citizen should probably be glad of low cost Chinese supply, but nurturing domestic capability as per Biden is sensible. [0]: https://prosperousamerica.org/skyrocketing-pharmaceutical-imports-to-the-u-s-endanger-national-security/ https://prosperousamerica.org/skyrocketing-pharmaceutical-im... [1]: https://www.fiercepharma.com/manufacturing/reopening-penicillin-plant-tennessee-jackson-healthcare-relieves-u-s-dependence-china https://www.fiercepharma.com/manufacturing/reopening-penicil... [2]: https://www.rand.org/news/press/2024/02/01/index1.html https://www.rand.org/news/press/2024/02/01/index1.html [3]: https://www.uscc.gov/sites/default/files/RosemaryGibsonTestimonyUSCCJuly152019.pdf https://www.uscc.gov/sites/default/files/RosemaryGibsonTesti... [4]: sources per https://youtu.be/hS0-ugYA-ko?si=xCNzctCGr9f2M7ct https://youtu.be/hS0-ugYA-ko?si=xCNzctCGr9f2M7ct

reactordev 1y ago
It’s so ironic. Just a couple weeks ago he was touting how he’s getting drug prices down. Except the tariffs kicked in, and now we’re going to be paying 50% more for those generics. If this were a chess move, we just lost our rooks.
- herbst 1y ago
  He claimed to bring prices down while (not after or before) increasing prices for meds from Switzerland for his people. With very little consequences on the Swiss market. He lied, obviously.
- Incipient 1y ago
  To continue the analogy, if the US lost a rook, everyone would take notice "damn that was a big blow". I think it's more like losing a pawn. Except now others have taken 3 unanswered pawns and everyone said "eh we've still got our queen" but now the queens are looking shaky and you're staring down a 3 pawn short endgame and no one believes you can turn it around.
  - reactordev 1y ago
    Praying your opponent makes a mistake great analogy.
- lenkite 1y ago
  Actually iPhone, Pharma and RING BELLS Processed Petroleum Products exported by India are currently exempt from US import tariffs. US wants to punish India for importing Russian oil - except when US themselves are consumers of that processed Russian oil.
herbst 1y ago
Wait the evil Chinese made drugs cheaper? That's evil!!!
deleted 1y ago
[deleted]

Fordec 1y ago

> The tax strategies these companies use are known Links to an article from 2017 about a tax loophole that was closed in 2020 [0]. As an Economist that by his Wikipedia article [1] dedicates so much of his time talking about the Irish tax regime, he should be well aware of this fact. [0] https://budgetmodel.wharton.upenn.edu/issues/2024/10/14/the-end-of-the-double-irish https://budgetmodel.wharton.upenn.edu/issues/2024/10/14/the-... [1] https://en.wikipedia.org/wiki/Brad_W._Setser https://en.wikipedia.org/wiki/Brad_W._Setser

muststopmyths 1y ago
You are talking about the "Double Irish", which was scotched (sorry) in 2020 by Ireland. The link under your quoted line in the TFA seems to be talking about Apple (and others) preparing for the end of the Double Irish by finding other tax havens. "Elite tax advisers help Apple Inc. and other corporate giants skirt impacts of crackdown on 'Double Irish' maneuvers." So, I don't see what's invalid about the TFA's point, which is about tax avoidance in general
refurb 1y ago
Yup, this article isn't great. As someone close to pharmaceutical manufacturing, the reason why the manufacturing is done in Ireland is for tax benefits for sales in Europe. So why not have a US factory for US sales? Because it's much more expensive and complex to have two separate factories making the same drug. It's far easier to just scale the Irish factory to serve all global sales. Even the same companies with Irish factories have US factories as well. It's not like any tax benefit moved that out of the US as well.
- kgwgk 1y ago
  Most of the value is in the patents, not in the manufacturing. Did they also expatriate that “accidentally”? If Pfizer operates in the US at a loss (or at least they did in 2018-2020) and all the profits are booked elsewhere it was their choice. https://www.finance.senate.gov/imo/media/doc/wyden_pfizer_investigation_report_final_march_2025pdf.pdf https://www.finance.senate.gov/imo/media/doc/wyden_pfizer_in...

rr808 1y ago

If you think that is bad wait and see what big tech companies do in Ireland.

mikepurvis 1y ago
Is that still going on? I was just reading about it in the Sarah Wynn-Williams book and it sounded like the EU was cracking down on it and bunch of execs were making backroom deals at Davos in the late 2010s to try to get extensions and sweetheart deals of various kinds. EDIT: Sigh, yeah looks like the famous Double Irish loophole closed in 2020, but there's another scheme that's come up since 2021: https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
- extraduder_ire 1y ago
  Ireland's been party to the GMCT agreement[0] since the end of 2023, so singling us out doesn’t make much sense anymore. Earlier this year the US withdrew from it, which complicates matters. Run of the mill tax avoidance strategies continue worldwide. 0: https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_rate https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_r...

BenFranklin100 1y ago

Corporate taxes are blunt instruments. They preferentially hurt workers. The C-suite decides how higher corporate taxes affect the company, and it’s not by lowering the CEO’s salary. It’s by firing people, hiring less, and making less investments in the business all else being equal. Corporate taxes also distort decisions of small business owners, who will pay out profits as salary to themselves rather than reinvesting the money in the company so as to avoid paying taxes on profits twice, first as a corporate tax and the second time as an income tax. A better solution is to slash corporate taxes and raise income taxes on high earners. This will end the practice of offshoring the story describes, and also spare workers the negative effects of corporate income taxes.

shoo 1y ago
Australia has another (strange?) solution: Australian public companies pay tax and issue dividends to shareholders. these dividend payments have attached tax credits ("franking credits") that can be used by the shareholder to reduce their income tax, so those dividend payments are not subject to double taxation (being subject to company tax and again to the individual shareholder's income tax). E.g. suppose you are a shareholder and receive a dividend of $1000 from some australian public company. If the australian company is large it will be subject to a 30% corporate tax rate. If the company paid company tax on earnings before issuing the dividend, then that dividend comes with a $(1000 / 0.7) * 0.3 = $428.57 tax credit which the shareholder can use to reduce their income tax bill. That said, in terms of the global landscape of low tax jurisdictions, Australia's corporate tax rate of 30% and highest marginal individual income tax rate of 47% make things less attractive.
- BenFranklin100 1y ago
  Interesting, thanks. I didn’t know about that. I could see how a version of that might address the double taxation problem small business owners face that I described.
themafia 1y ago
> It’s by firing people, hiring less, and making less investments in the business all else being equal. This is farcical. The universal response to higher taxes is to create less revenue? Exactly how does this benefit the CEOs salary? Or improve outcomes for shareholders? > who will pay out profits as salary to themselves rather than reinvesting the money in the company so as to avoid paying taxes on profits twice The IRS keeps an eye on this. The business owner does not have unlimited runway and the salary selected must be reasonable. It's also not the only tax vehicle available to the owner to reduce or eliminate the "double taxation" that can occur on profit distributions. There's like half a dozen ways to solve this problem from an ownership perspective. It should also be noted that the personal income tax rate and the capital gains tax rate are likely to offer very different outcomes for the owner. It's hardly as cut and dry as you project. > A better solution is to slash corporate taxes and raise income taxes on high earners. So the corporations engage in practices like buybacks and overfund the business and workers wages end up artificially depressed? A better solution is to examine the problem and respond with appropriately designed policies that are outcome oriented. These "quick fix" and "slash and burn" policies are _precisely_ how we ended up here. Swinging the pendulum all the way to the other extreme creates the same amount of misery just in a different direction.

daft_pink 1y ago

Seems like the tariffs are having their intended effect.

judge123 1y ago

Is this 'round-tripping' thing just a fancy term for why my parents' medication costs more than a car payment? Just trying to connect the dots from their balance sheet to my wallet.

readthenotes1 1y ago
Not at all. It only explains why a pharmaceutical company has an overseas office. Your parents medication cost more than a car payment because there's no motivation in the US system to reduce prices for most drugs. Quite the opposite for insurers who provide ACA--they're actually incentivized to increase the cost of care so that the 20% they are allowed to spend on marketing, executive compensation, etc can grow as well.
- zamadatix 1y ago
  I can't tell if this is trying to say the ACA should have set it to 0% so there is no incentive, if there is supposed to be something special about 20% which makes executives greedy but at 100% they'd have no interest in trying to make a bigger bonus, or if I'm missing something else completely. I feel like it has to be the latter, I just can't figure out what.
  - rolisz 1y ago
    I think it's implying that it gives an incentive to make things more expensive, because then they can make more money. If that profit cap didn't exist, they could make more money in other ways, such as lowering costs but keeping prices the same (or lowering them less).
    - Auracle 1y ago
      Exactly. I firmly believe that was a poison pill put in the bill to try and eventually push insurance prices so high that Americans would acquiesce to single payer. The alternatives are the bill’s authors were so stupid they didn’t see the negatives to that action, they thought it would play well to voters and the rest be damned, or the some big medical players got it put in - which would be risky, considering option A. But yeah, with that in place they have no incentive to pay out less - they simply can’t have it raise higher than their competitors too quickly. I feel like Republicans would have made a bill just to get rid of that one portion but the voters would hate it so much they can’t because people’s grasp on economics is too simple.

cycomanic 1y ago

Can someone explain why the Netherlands are included in the graph of low tax juristictions? As far as I know their corporate tax rate is 25.8% which is larger than the 21% us rate.

ExoticPearTree 1y ago
I think it has to do with the fact that you can export tge profit to friendlier jurisdictions afterwards. For this reason a lot of tech companies have subsidiaries in the Nerherlands. Uber is the first example that comes to mind. All card charges when you take an Uber in Europe are to Uber N.V - which is a Dutch Entity.
terminalshort 1y ago
25.8% of what? Tax loopholes operate on calculating that, not lowering the percentage.
hdgvhicv 1y ago
Way under personal tax rates though, and it’s taxed on profit not revenue
bux93 1y ago
Those corporate taxes are only paid by small companies. The Netherland has a decades old strategy of being "business friendly" - if you're a huge corporate. This culminates in two things. One, The Netherlands has the most tax treaties of any country. This creates many loopholes. Two, The Netherlands Tax Authority will happily help you take advantage of those. You just have to call them up and say "I plan to sell and lease back some IP through Swasiland, is that OK?" and they will tell you up front whether the loophole you found is OK to use - it's called a "ruling" and it's binding to them. This takes away any concern your tax lawyers might have about being thrown in jail for being too creative. The basic idea is that The Netherlands would rather help a big corporate avoid paying 10% tax in another country, if it means they pay 1% in The Netherlands. Or even 0% corporate taxes and only some payroll tax for the people working at the Dutch office (job creation for tax lawyers who, as established earlier, lead a stress-free life). A while back, some executives from the Shell oil company appeared on Dutch television proudly saying "of course we don't pay taxes! Why else would our HQ be here?". This was a bit too rich even for the Dutch viewers, and Shell ended up moving to the UK, presumably after some of their tax rulings got a second look due to political pressure. Unilever similarly left to the UK (who were also giving out tax deals like candy after Brexit ruined their economy). Note that the author is conflating The Netherlands being a tax haven (which it is) with the location pharmaceuticals are produced. To take advantage of Dutch tax avoidance strategies, most companies focus on intellectual property; this is why your IKEA pitches has "copyright InterIKEA systems B.V." printed on it. Made in some low wage country, but the license fees for its design are paid to a Dutch for-profit company owned by a non-profit(?) foundation. In other words, it's easier to produce pharmaceuticals in, say, the Phillipines, and then do some shady (well, pre-approved) accounting to make taxable income disappear into thin air. There's also going to be some importing and re-exporting going on (guess which EU country is home to its biggest port, despite being a tiny country). Nevertheless, pharma production - or rather "life sciences" - in The Netherlands is one of the governments 9 focus industries. This policy is focused mostly on high-value add activities like R&D rather than production. This will also skew the numbers.

aDyslecticCrow 1y ago

> according to U.S. trade data, equivalent to the weight of less than four Tesla Cybertrucks Americans will truly use anything but the metric system.

_Algernon_ 1y ago
Similes don't exist in Europe?
- ChrisMarshallNY 1y ago
  Is the UK still considered part of Europe? https://www.theregister.com/Design/page/reg-standards-converter.html https://www.theregister.com/Design/page/reg-standards-conver...
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khalic 1y ago

And there we go, people actually using “trade imbalance” as a valid economical concept. If you let clown dictate your vocabulary, you’ll be spitting confettis in no time. Please be smarter than this. There is no such thing as trade imbalance, it’s called trade, if you have more money, you buy more.

herbst 1y ago
It's not only funny as f but also scary and sad to see people who could be smarter than this falling for orange man and his words and actually dare to repeat them internationally, not only confusing everyone that doesn't know about Americas misleaded ideas but also enforcing the idea that any of this makes any sense anywhere else than in orange mans head.
blauditore 1y ago
Well, more money flows in one direction in such cases, which might or might not be intended. As long as there's enough influx of money from other places, this can even be long-term sustainable (e.g. a triangle of trade). It seems that China is currently a "sink" in the global flow of money, which will obviously change the landscape in the long run. How? Hard to tell, probably not in such a bad as many people fear. I think it will eventually drive up prices of Chinese export goods, which will force importers to look for alternatives, which is likely better in many regards than having one country manufacturing everything for everyone in the world. But don't trust me, I'm just a random poster on the internet.
- khalic 1y ago
  The issue is the framing itself, calling it an imbalance or deficit, when it’s way more complicated than this. It’s a really good strategy to frame the issue in your advantage. Doesn’t make it useful or meaningful
stogot 1y ago
Some export more. Some import more. Some want to be the opposite. If you’re in that position, you’d consider yourself out of balance

jmyeet 1y ago

I firmly believe we need revenue apportionment of profits. By this I mean that if you have $100 billion in revenue and $80 billion in costs then you have $20 billion in profits. If half that revenue ($50 billion) comes from sales in the US then half that profit ($10 billion) is taxable US income. You might be tempted to argue they'll use subsidiaries to shift profits but we already have ways of dealing with that. We also have earnings that get reported to financial markets so you can always use the baseline revenue and earnings numbers from that. We have ways too of dealing with transfer pricing and profit-shifting. How far do companies get if they can't report earnings to the markets? Or if they try and tank earnings to reduce their tax liability? You might be tempted to ask "what about private companies?" Subject them to the same reporting standards and auditing requirements of any US-listed company or they don't get access to the US market. This idea that companies can't be taxed because they're too clever needs to die. So does the idea that they shouldn't be taxed. Governments, particularly the US government and the EU, wield extraordinary power. You can bring companies to heel by withholding access to a market pretty quickly. It's why I always laugh when companies threaten to abandon a market. As long as there is profit to be made, a company will never leave. Non-IP assets can't generally be picked and moved so you always hold sway over a significant portion of their assets. And the US has the additional power to withhold access essentially to the global financial system. And of course governments always have the option of nationalizing industries. Governments should serve the interests of their citizens and corporations should serve the interests of those governments. Governments should not be subservient to corporate interests. Unfortunately, the US government at this point is basically just six companies in a trenchcoat.

tossandthrow 1y ago
This would heavily encourage exports and disalign the company's incentives with the nation's. I do, however, this could be a good idea. But I think the true issue is that we need a globally unified tax framework (and serious retaliation if a nation decides not to adopt it).
- DebtDeflation 1y ago
  100%. All of these schemes depend on the existence of a jurisdiction with low (or non-existent) corporate taxes that they can shift profits to in order to avoid paying taxes in the actual jurisdictions in which they manufacture and sell. Doesn't matter whether at its core it's a transfer pricing scheme, an IP royalty scheme, or a thin capitalization scheme. You need a man (country) in the middle with low/no taxes where you will recognize the profit you don't want taxed.

tracker1 1y ago

I've said repeatedly, that medications and medical equipment should have a requirement of at least 50% domestic production (end to end) and dual sourcing in the US. Just from a security standpoint. That should have been the lesson of the COVID pandemic. I feel similarly for infrastructure and communications as well.

Arturo525 1y ago

Brilliant. Make big pharma pay more taxes and watch drug prices soar.Thimk.