Senate Finance chair calls on Merck and Abbott to comply with his investigation into their offshore tax schemes – Endpoints News

Sen­ate Fi­nance com­mit­tee chair Ron Wyden (D-OR) on Wednes­day sent fol­low-up let­ters to Mer­ck and Ab­bott af­ter both com­pa­nies failed to an­swer ques­tions and com­ply with his in­ves­ti­ga­tion in­to how a 2017 tax law helped slash tax rates for large, US-based phar­ma com­pa­nies thanks to shift­ing prof­its off­shore.

Last April, Wyden sent a stern let­ter to Mer­ck’s CEO and pres­i­dent Robert Davis ques­tion­ing the com­pa­ny’s abil­i­ty to go from an ef­fec­tive tax rate of 22.9% in 2020 to less than half that a year lat­er, down to 11% in 2021, thanks large­ly to Mer­ck’s use of sub­sidiaries in sev­er­al well-known low-or-ze­ro tax ju­ris­dic­tions.

For Mer­ck’s mega-block­buster can­cer drug Keytru­da, Wyden al­leged that since Mer­ck, which lob­bied heav­i­ly in fa­vor of the 2017 law, holds the IP rights to Keytru­da in the Nether­lands and man­u­fac­tures the drug en­tire­ly in Ire­land, the com­pa­ny is able to avoid bil­lions of dol­lars in tax­es in the US.

Sim­i­lar­ly, in a com­mit­tee in­ves­ti­ga­tion in­to Ab­b­Vie, which pulls in tens of bil­lions every year in the US thanks to its Hu­mi­ra mo­nop­oly that runs out in Jan­u­ary, Wyden re­veals how the 2017 law’s in­ter­na­tion­al pro­vi­sions re­ward­ed large multi­na­tion­al cor­po­ra­tions that shift prof­its over­seas.

“That Mer­ck lo­cat­ed more than 85% of its prof­its in for­eign ju­ris­dic­tions in 2021 im­plies that the cur­rent U.S. in­ter­na­tion­al tax sys­tem cre­at­ed by the 2017 Re­pub­li­can tax law has en­cour­aged and re­ward­ed Mer­ck’s shift­ing of prof­its off­shore,” Wyden wrote on Wednes­day.

He pre­vi­ous­ly re­quest­ed coun­try-spe­cif­ic in­for­ma­tion re­lat­ed to Mer­ck’s pre-tax earn­ings, prof­it mar­gins, em­ploy­ee head­count and tax paid for tax years 2018 – 2021, but the com­pa­ny de­clined to send the in­for­ma­tion.

“Un­for­tu­nate­ly, Mer­ck has twice de­clined to pro­vide the Com­mit­tee this in­for­ma­tion, choos­ing to keep se­cret how much of its prof­its are re­port­ed by off­shore sub­sidiaries for tax pur­pos­es. As not­ed in pre­vi­ous com­mu­ni­ca­tions on this mat­ter, there ap­pears to be a sub­stan­tial dis­crep­an­cy be­tween where Mer­ck gen­er­ates pre­scrip­tion drug sales and where Mer­ck books prof­its from those drug sales for tax pur­pos­es,” Wyden wrote to Mer­ck on Wednes­day.

Wyden al­so sent a let­ter Wednes­day to Ab­bott, which sim­i­lar­ly did not re­spond to re­quests for in­fo and used its for­eign ops to pay an ef­fec­tive US tax rate of 9.6% in 2019, 10% in 2020 and 13.9% in 2021, de­spite the US be­ing the com­pa­ny’s “biggest cus­tomer mar­ket and prof­it cen­ter.”

He added: “The Amer­i­can pub­lic de­serves to un­der­stand why Ab­bott, a multi­na­tion­al phar­ma­ceu­ti­cal cor­po­ra­tion with an­nu­al sales of $43 bil­lion, paid a low­er tax rate than a postal ser­vice work­er or a preschool teacher.”