US legistators want strict tax laws to stop overseas tax savings - JNJ, MRK, PFE, GE & ABT
Northern, WI 03/11/2013 (avauncer) - The top six largest US drug manufacturers evaded paying $7.05 billion to the government in form of tax in 2012 while investing their profits accrued to foreign countries. The amount these firms avoided last year was twofold the amount stashed away 10 years ago, according to a report.
Multinational pharmaceutical giants like Johnson & Johnson (NYSE:JNJ), Merck & Co. (NYSE:MRK) and Pfizer Inc. (NYSE:PFE) more often credit patent rights and trademarks to their subsidiaries in different countries so that they do not have to pay tax to the US government. These firms generally choose those destinations where either low or no tax is applicable. By adopting this strategy the drugmakers save taxes, which would normally be applicable on sale of drug products in the US.
This practice is being observed by several companies in the US for years under the pretext of current regulations, which do not deem the act illegal. But now the matter is under serious consideration before legislators who do not approve the trend considering the country’s financial conditions.
US Senator Charles Grassley is of the opinion that an appropriate tax method in this regard could help the country to bring back the tax money these firms are salting away. This would further create job opportunities for the US nationals as the firms would be compelled to invest more in the country, he went on to say. He criticized the current tax system which is providing incentives to these firms to shift their profits elsewhere.
Johnson & Johnson and Merck moved around $2 billion each to overseas locations in order to save tax in 2012, a regulatory filings report disclosed.
The US government is mulling over revising the present tax system as there have been noticeable loss to the exchequer while these firms exploit the existing tax rules leading to an increase in the nation’s fiscal deficit and drying job opportunities for local youth.
According to a report, there are 83 firms stockpiled around $1.43 trillion in different countries in form of profits that are not taxed. General Electric Co. (NYSE:GE) tops the list with $108 billion, the company said in its filings. Among drug manufacturers, Pfizer has $73 billion overseas and Abbott Laboratories (NYSE:ABT) reported $40 billion.
Republican senators Grassley and Camp have suggested giving some sort of encouragements to firms to bring back their stockpiles to invest locally and create more jobs.
President Obama’s Treasury Secretary, Jacob Lew, conveyed senators on the finance committee that there was a possibility to get a breakthrough in the matter.
The shares of Johnson & Johnson(NYSE:JNJ) were up by 0.28% and currently trading at $78.41
The shares of Merck & Co., Inc.(NYSE:MRK) were up by 0.83% and currently trading at $43.32
The shares of Pfizer Inc.(NYSE:PFE) were up by 0.27% and currently trading at $28.26
The shares of General Electric Company(NYSE:GE) were down by 0.72% and currently trading at $23.60
The shares of Abbott Laboratories(NYSE:ABT) were up by 0.32% and currently trading at $34.79