The letter states that AbbVie appears to have shifted profits offshore while reporting a domestic loss in the United States to avoid paying US corporate income tax. The Committee has asked the company to provide answers to specific tax questions no later than June 16, 2021.
On June 2, 2021, US Senate Finance Committee launched an investigation into AbbVie’s international tax practices and how the 2017 Republican Tax Law has allowed the company to avoid paying taxes on US prescription drug sales.
In a letter written to the biopharma company and seen by TP News, Committee Chair Ron Wyden, D-Ore. sought information on the methods employed by AbbVie to pay a stunningly low effective tax rate that has averaged 9.5 percent in the three years since the enactment of the 2017 Republican Tax Law.
The letter states that AbbVie appears to have shifted profits offshore while reporting a domestic loss in the United States to avoid paying US corporate income tax.
The Committee has asked the company to provide answers to specific tax questions no later than June 16, 2021.
Ron Wyden, D-Ore. said: “AbbVie has been able to successfully exploit the incentives to offshore profit included in that law. According to company documents, AbbVie’s effective tax rate fell to just 8.7 percent in 2018, the first year after the passage of the 2017 Republican tax law. AbbVie subsequently paid an effective tax rate of just 8.6 percent in 2019 and 11.2 percent in 2020, rates that are far lower than the statutory corporate income tax rate of 21 percent in the United States, and even far lower than what AbbVie paid just a few years before. Prior to the passage of the 2017 tax law, AbbVie paid effective tax rates of 20 percent in 2016 and 19 percent in 2017.”
Wyden continued: “Instead of using the massive tax cuts given to AbbVie by the 2017 tax law to reduce drug prices for American families, AbbVie has instead chosen to provide a $10 billion windfall to its investors by substantially increasing the amount of money it spent buying back its own stock. In 2018 and 2019 AbbVie spent almost $13 billion on stock buybacks, quadruple what it spent on stock buybacks in the two years prior to the enactment of the 2017 tax law. In 2016 and 2017, AbbVie spent $3.1 billion on stock buybacks.”
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com