Wyden Presses Pfizer to Cooperate With Profit-Shifting Investigation

In the latest development of a three-year investigation into potentially abusive tax strategies used by major players in the pharmaceutical industry, the top Senate taxwriter urged Pfizer to disclose country-by-country information on its profits and related tax information, unsatisfied with the company’s prior reluctance.

According to Senate Finance Committee Chair Ron Wyden’s (D-OR) letter to Pfizer Senior Vice President Jennifer Walton dated October 3 and released October 10, the company did not provide specific enough details in its response to Wyden’s first inquiry into the extent to which Pfizer leverages the international tax system to reduce its U.S. liabilities through shifting profits to foreign subsidiaries in low-tax jurisdictions.

In May, Wyden requested the company enlighten Senate Finance on how it paid “single digit tax rates” far lower than the federal corporate income tax rate of 21%. Wyden specifically asked for “country-specific information related to Pfizer’s pre-tax earnings, profit margins, employee headcount and taxes paid for tax years 2018-2023,” including copies of its Forms 8975, Country by Country Report, which large multinationals with over $850 million in yearly income are required to file.

The chairman also sought records on taxable income reported by controlled foreign corporations and tax incentive agreements with Puerto Rico and Singapore.

Accusing Pfizer of “choosing to keep secret” profits reported by offshore subsidiaries, Wyden said the company “reaped” a “windfall” due to foreign subsidiaries paying the lower global intangible low-tax income, or GILTI, rate established by the Tax Cuts and Jobs Act (TCJA, P.L 115-97), despite sourcing the vast majority of its revenue from the U.S.

Pfizer has “even reported losses in the United States for tax purposes,” wrote Wyden. “For example, in 2023 Pfizer claimed a $4.4 billion loss in the U.S. on $27 billion in U.S. sales while reporting $5.4 billion in earnings on $31 billion in foreign sales. Similarly, in 2020 Pfizer claimed a $2.9 billion loss in the U.S. on $21.7 billion in U.S. sales while reporting a $9.9 billion profit on equivalent foreign sales.”

Since 2021, Wyden has led an investigation to understand how “Big Pharma” companies like Pfizer, which earns “at least $58 billion” in annual sales, pay “a lower tax rate than a school teacher or firefighter.” The first of the committee’s findings were shared in a 2022 interim report centered around AbbVie. It was concluded that AbbVie “exploited” the TCJA’s international tax regime to pay effective tax rates as low as under 9%.

In May 2023, Wyden circulated a memorandum with Democratic staff illustrating that the 2017 tax reform bill gave large drug providers a 40% tax cut and that 75% of taxable income is reported by foreign subsidiaries.

Wyden stated Pfizer is the only company of the six examined as part of the investigation to not comply with the committee’s requests. In the company’s June letter, Pfizer claimed the questions asked would “implicate confidential arrangements” with Puerto Rico and Singapore. Further, Pfizer cited taxpayer information confidentiality concerns under Code Sec. 6103, but Wyden was not swayed.

“As you are surely aware, section 6103 does not apply to information in the possession of the taxpayer,” he wrote back. “I take seriously the need to protect taxpayer privacy and the confidentiality of tax return information, but section 6103 does not prevent Pfizer from providing any information contained in its tax returns to the Committee, including how much of Pfizer’s taxable income is reported by controlled foreign corporations.”

Wyden gave Pfizer until October 11 to comply with a laundry list of tax and financial information requests, telling the company that its prior reluctance “has only heightened” his suspicion that it uses profit-shifting to “avoid paying billions of dollars in taxes” on domestic drug sales.

Pfizer did not immediately respond to Checkpoint’s request for comment.