The idea of companies moving their businesses to other parts of the world to benefit from lower taxes is not new. Allergan, the maker of Botox® and other drugs, transferred its global headquarters from New Jersey to Ireland in 2013. Medtronic moved its headquarters to Ireland in 2015, once it completed the acquisition of Covidien, an Ireland-based medical device company. More recently, in 2016, Pfizer was looking to reap similar tax benefits through a corporate inversion by merging with Allergan, until the Obama administration put new tax rules in place that ended that pursuit.
It is clear that businesses headquartered in the United States want a more favorable tax climate to help create more shareholder value. While tax codes are incredibly complicated, it is widely understood that lower tax rates can help produce more jobs, boost innovation, and spur merger and acquisition activity.
Ian Read, CEO of Pfizer, said, “The most impactful thing with tax reform will be to level the playing field between U.S. companies and foreign companies in regards to the foreign companies not having the tax advantage of acquiring companies and then taking it to a low-tax location…That’ll be a fundamental change in competitiveness.”
Amgen’s Chairman and CEO Robert Bradway shares a similar viewpoint. “We’ve long supported corporate tax reform as a way to level the playing field with our ex-U.S. competitors, and we look forward to being part of the policy discussions with the new administration…I think this administration expects to deliver real progress.”
Recently, 16 business executives, including Eli Lilly’s David Ricks, Pfizer’s Ian Read, Merck’s Kenneth Frazier, and Celgene’s Mark Alles, signed a letter to congressional leaders advocating for a border-adjustment, lower tax rates, and specific write-offs. A new tax plan, they argue, would help boost economic growth.
“These changes will free up much-needed capital for companies to invest here in the U.S., help stop corporate inversions and acquisitions of U.S. companies, and protect American jobs from unfair foreign competition,” the business executives wrote.
“Incremental tweaks will not level the playing field for American workers or dramatically reinvigorate economic growth,” the letter said. “If we miss this chance to fundamentally reshape the tax code, it might take another 30 years before we have another chance to try.”
All of the leaders who signed the letter are part of the American Made Coalition, a new group that formed in 2017 to support the border-adjustment tax.
Pharmaceutical companies have a reason to be hopeful. Paul Ryan, Speaker of the House, who has proposed lowering the corporate income tax to 20% from 35%, imposing a 20% tax on imports, and excluding export revenue from taxable income, praised the letter.
In a press conference following his meeting with industry executives, President Trump also said he wants drug companies to move their manufacturing facilities (and jobs) back to the United Sates.
To explore several other key issues and perspectives from industry executives that have the potential to significantly impact life sciences companies in 2017 and beyond, download The State of the Life Sciences Industry, our new guide.