Seems like the tariffs are having their intended effect.
Fordec · 1h ago
> The tax strategies these companies use are known
Links to an article from 2017 about a tax loophole that was closed in 2020 [0]. As an Economist that by his Wikipedia article [1] dedicates so much of his time talking about the Irish tax regime, he should be well aware of this fact.
It was interesting to read how much of the US drugs market relies on imports. The article deals with the high value stuff. However, by volume, 90% of drugs used in the US are cheaper generics often with no US manufacturers. The US is heavily reliant on India and ultimately China for both active pharmaceutical ingredients and key starting materials. With 80% of Indian production using starting materials from China.[0]
The US had no domestic production of penicillin between 2004[3] when its last plant shuttered until 2021 when a factory reopened.[1] (source 1 and 3 appear to contradict, the 2019 testimony states there was no manufacturer after 2004 whereas it sounds like the plant closed in 2020, regardless the domestic capability is extremely weak)
As usual for American sources this is painted as some nefarious scheme by the evil red Chinese to destroy America by making cheaper drugs available. To add my own editorialising I think US companies are easily capable of ruining US manufacturing and focusing on screwing US patients over.[2] The average citizen should probably be glad of low cost Chinese supply, but nurturing domestic capability as per Biden is sensible.
It’s so ironic. Just a couple weeks ago he was touting how he’s getting drug prices down. Except the tariffs kicked in, and now we’re going to be paying 50% more for those generics. If this were a chess move, we just lost our rooks.
rr808 · 24m ago
If you think that is bad wait and see what big tech companies do in Ireland.
mikepurvis · 7m ago
Is that still going on? I was just reading about it in the Sarah Wynn-Williams book and it sounded like the EU was cracking down on it and bunch of execs were making backroom deals at Davos in the late 2010s to try to get extensions and sweetheart deals of various kinds.
Corporate taxes are blunt instruments. They preferentially hurt workers. The C-suite decides how higher corporate taxes affect the company, and it’s not by lowering the CEO’s salary. It’s by firing people, hiring less, and making less investments in the business all else being equal. Corporate taxes also distort decisions of small business owners, who will pay out profits as salary to themselves rather than reinvesting the money in the company so as to avoid paying taxes on profits twice, first as a corporate tax and the second time as an income tax.
A better solution is to slash corporate taxes and raise income taxes on high earners. This will end the practice of offshoring the story describes, and also spare workers the negative effects of corporate income taxes.
shoo · 6m ago
Australia has another (strange?) solution: Australian public companies pay tax and issue dividends to shareholders. these dividend payments have attached tax credits ("franking credits") that can be used by the shareholder to reduce their income tax, so those dividend payments are not subject to double taxation (being subject to company tax and again to the individual shareholder's income tax).
E.g. suppose you are a shareholder and receive a dividend of $1000 from some australian public company. If the australian company is large it will be subject to a 30% corporate tax rate. If the company paid company tax on earnings before issuing the dividend, then that dividend comes with a $(1000 / 0.7) * 0.3 = $428.57 tax credit which the shareholder can use to reduce their income tax bill.
That said, in terms of the global landscape of low tax jurisdictions, Australia's corporate tax rate of 30% and highest marginal individual income tax rate of 0.47% make things less attractive.
BenFranklin100 · 3m ago
Interesting, thanks. I didn’t know about that. I could see how a version of that might address the double taxation problem small business owners face that I described.
pstuart · 2h ago
This would be wonderful to have happen but the current regime does not engender hope in tax reform that serves the country rather than the rich who own it.
Links to an article from 2017 about a tax loophole that was closed in 2020 [0]. As an Economist that by his Wikipedia article [1] dedicates so much of his time talking about the Irish tax regime, he should be well aware of this fact.
[0] https://budgetmodel.wharton.upenn.edu/issues/2024/10/14/the-... [1] https://en.wikipedia.org/wiki/Brad_W._Setser
The US had no domestic production of penicillin between 2004[3] when its last plant shuttered until 2021 when a factory reopened.[1] (source 1 and 3 appear to contradict, the 2019 testimony states there was no manufacturer after 2004 whereas it sounds like the plant closed in 2020, regardless the domestic capability is extremely weak)
As usual for American sources this is painted as some nefarious scheme by the evil red Chinese to destroy America by making cheaper drugs available. To add my own editorialising I think US companies are easily capable of ruining US manufacturing and focusing on screwing US patients over.[2] The average citizen should probably be glad of low cost Chinese supply, but nurturing domestic capability as per Biden is sensible.
[0]: https://prosperousamerica.org/skyrocketing-pharmaceutical-im...
[1]: https://www.fiercepharma.com/manufacturing/reopening-penicil...
[2]: https://www.rand.org/news/press/2024/02/01/index1.html
[3]: https://www.uscc.gov/sites/default/files/RosemaryGibsonTesti...
[4]: sources per https://youtu.be/hS0-ugYA-ko?si=xCNzctCGr9f2M7ct
EDIT: Sigh, yeah looks like the famous Double Irish loophole closed in 2020, but there's another scheme that's come up since 2021: https://en.wikipedia.org/wiki/Double_Irish_arrangement
A better solution is to slash corporate taxes and raise income taxes on high earners. This will end the practice of offshoring the story describes, and also spare workers the negative effects of corporate income taxes.
E.g. suppose you are a shareholder and receive a dividend of $1000 from some australian public company. If the australian company is large it will be subject to a 30% corporate tax rate. If the company paid company tax on earnings before issuing the dividend, then that dividend comes with a $(1000 / 0.7) * 0.3 = $428.57 tax credit which the shareholder can use to reduce their income tax bill.
That said, in terms of the global landscape of low tax jurisdictions, Australia's corporate tax rate of 30% and highest marginal individual income tax rate of 0.47% make things less attractive.