Finance chairman investigating drugmaker AbbVie’s tax strategy

Senate Finance Chair Ron Wyden launched an investigation Wednesday into AbbVie’s international tax practices, accusing the pharmaceutical company of shifting profits offshore and registering patents in low-tax jurisdictions to avoid paying U.S. corporate income taxes. 

Wyden, an Oregon Democrat, wrote to AbbVie Inc. CEO Richard A. Gonzalez questioning how the company has paid “a stunningly low effective tax rate” and “consistently reported net losses in the U.S. and net income outside of the U.S.” despite its domestic headquarters and sales presence. 

AbbVie’s effective tax rate dropped from a 22 percent average before enactment of the 2017 tax law, which cut the statutory corporate rate from 35 percent to 21 percent, to a 9.5 percent average in the three years after Republicans passed their tax overhaul.

“It appears that AbbVie shifts profits offshore while reporting a domestic loss in the United States to avoid paying U.S. corporate income taxes, and that the current U.S. international tax system seems to encourage that,” Wyden wrote, citing company documents and public reports that show AbbVie reports income and registers patents in low-tax jurisdictions. 

A spokesperson for North Chicago, Ill.-based AbbVie  didn’t immediately respond to a request for comment.

Wyden criticized AbbVie for using its savings from the 2017 tax law to provide “a $10 billion windfall” to investors through stock buybacks — quadruple the value of what it spent on share repurchases in the two years before the law’s enactment — instead of reducing drug prices. 

He asked Gonzalez to provide information on how AbbView used the 2017 law’s international provisions to reduce its corporate tax burden, noting the information would be used as part of a larger investigation into how the law created incentives for multinational corporations to shift profits overseas.

Wyden requested answers to that and other questions, as well as a country-by-country breakdown of AbbVie’s pre-tax earnings, profit margins, employee headcount and tax paid no later than June 16. 

The Finance Committee investigation comes as European Union government and parliament negotiators reached a deal on Tuesday to require large multinational companies to disclose aggregate data on how much profit they earn and tax they pay in the 27-nation bloc but declined to push for country-by-country breakdowns.  

The United States also does not require country-by-country reporting, which is why Wyden is seeking that information from AbbVie for his investigation. The Financial Accountability and Corporate Transparency Coalition, a nonpartisan umbrella group of state, national and international organizations, is calling on Congress to pass legislation requiring multinationals to publicly report their country-by-country corporate tax data. 

“It’s time for the U.S. to step up where the European Union did not and implement this much needed tax transparency measure,” Ian Gary, the FACT Coalition’s executive direction, said in a statement Wednesday. 

The group has endorsed legislation introduced last month in both chambers by Rep. Cindy Axne, D-Iowa, and Sen. Chris Van Hollen, D-Md., that would require multinationals registered with the Securities and Exchange Commission to disclose country-by-country reporting data. The FACT Coalition said such information is already reported to the IRS, so publicly disclosing it would impose a “negligible” burden.

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