In a recent Oval Office meeting with Irish Prime Minister Micheal Martin, President Donald Trump conceded that Ireland has taken a great deal of pharmaceutical business from the United States due to favorable taxation.
President Trump laid the blame for this on the Biden administration.
While the Biden administration failed to solve this tax problem, Congress and President Trump can do better, building on the successes of the 2017 tax reforms.
In 2017, Republican tax reforms under the Tax Cuts and Jobs Act (TCJA) instituted a new tax system for American companies with global operations.
Those reforms introduced a groundbreaking new tax policy called the Global Intangible Low-Taxed Income.
Global Intangible Low-Taxed Income, or GILTI can be understood as a special category of a US corporation’s foreign income that is subject to a minimum level of tax.
GILTI is taxed at a lower rate of 10.5 percent.
GILTI was a gamechanger that made it harder for most companies to artificially offshore their profits to other countries like Ireland.
But unfortunately, the TCJA left open a loophole known as "round-tripping" that still allows American pharma companies to get a tax break for selling products to American consumers while routing the manufacturing to a foreign subsidiary located in a tax haven like Ireland, according to George Callas, former tax staffer for Speaker Paul Ryan, R-Wis., a key architect of the TCJA.
Aidan Regan, a professor of political economy at University College Dublin told The Guardian newspaper that Trump was right to call out the trade imbalance, and that of the billions of dollars in medicines that are exported worldwide from Ireland every year, many “never touch Irish soil."
Regan went as far to say that "Trump and his team are very aware of that and could just tweak the tax code to put pressure on the companies to [move] more profit to the US."
FOX News reported that U.S. pharmaceutical companies have been migrating to Ireland since the early 2000s.
According to a report from the Council on Foreign Relations (CFR), some the biggest U.S. pharmaceutical companies do not expect to pay U.S. taxes for 2024.
An appreciable number of major pharmaceutical companies have reported the amount they've purportedly set aside, out of their 2024 profit, to pay their U.S. corporate income tax.
CFR reported that only Eli Lilly is believed to have put aside money to pay its 2024 tax.
Several companies reported tax losses, thus owing nothing to the U.S. government.
The same companies did not put aside any money for taxes in 2023.
Congress must address certain TCJA expirations this year.
This is not what President Trump’s supporters want.
According to a recent poll by President Trump’s polling firm McLaughlin and Associates, 87% of those polled agree that the U.S. tax code should support U.S. manufacturing and jobs, rather than rewarding big American companies that ship operations overseas.
But right now, we have an America-last tax code that unfairly punishes U.S. entrepreneurs, domestic businesses, and workers by putting a finger on the scale for large multinational corporations, who can play sophisticated accounting games to move earnings to tax havens.
Profits booked in Dublin should be taxed the same as those in Dubuque.
By building on the tools provided by the 2017 tax law, Congress can raise substantial revenues and eliminate incentives baked into our tax code that harm American workers and disadvantage domestic small businesses.
Doing so would help to create a level playing field for all businesses in which hard work and innovation — not harmful and discriminatory tax breaks — determine success.
Congress now has an opportunity to revisit and strengthen these provisions to ensure a level playing field for all American businesses, including small domestic businesses, while raising significant additional revenues needed to address President Trump’s fiscal priorities.
Donald Trump was elected on an "America First" platform.
A necessary step to putting America first, and its working people, is to make it beneficial for American companies to do business, make profits and pay taxes in the United States.
Craig Shirley is Chairman of Citizens for the Republic. Read Craig Shirley's Reports — More Here.
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