Big pharma resists international corporate tax proposal

Pharma companies are resisting a tentative agreement between 130 countries to create a minimum corporate tax of 15%. The plan intends to combat tax inversion and other forms of tax avoidance.

Some U.S. industries, including Big Tech, have backed the plan given its potential to simplify accounting — even if it increases their tax rate.

But the pharma industry is highlighting its role in developing COVID-19 vaccines and other therapies in their opposition to the plan. Arguing that higher taxes would curb their ability to innovate, drug companies are worried about the proposal’s threat to their bottom line. Large pharma companies could see their tax bill increase by hundreds of millions of dollars annually if the plan is finalized. Moreover, pharmaceutical companies could see a larger tax hike than some other industries given their global presence, reliance on tax havens and substantial R&D operations. Some companies, however, have won significant tax breaks for research.

According to WSJ, Pfizer (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) have played a prominent role in the discussions. Both companies have developed COVID-19 vaccines and other therapies.

The top 20 pharma companies have an effective tax rate of roughly 17%, according to WSJ.

The pharma industry has long faced the specter of tax increases. In 2009, PwC warned of the potential of pharmaceutical companies’ effective tax rate to increase significantly.

Earlier this year, President Biden announced a plan to levy a 21% minimum tax on corporations’ off-shore profits and a 15% minimum tax on profits logged in financial statements. The proposal was part of Biden’s multiple-trillion-dollar infrastructure proposal. Last week, the plan hit a roadblock when Senate Republicans blocked an effort to begin debate on the infrastructure plan.