Question
AbbVie Inc., a pharmaceutical company based in Illinois, has come under scrutiny for using subsidiaries in Bermuda and Puerto Rico to minimize its tax burden,
AbbVie Inc., a pharmaceutical company based in Illinois, has come under scrutiny for using subsidiaries in Bermuda and Puerto Rico to minimize its tax burden, according to a report by the Senate Finance Committee. The report highlights how AbbVie Biotechnology Ltd., a Bermuda-based subsidiary with no significant operations in Bermuda, owns the U.S. intellectual property rights for its arthritis drug Humira. The drug is manufactured in Puerto Rico, which is considered foreign for tax purposes. This structure allows AbbVie to report almost all its taxable income in foreign subsidiaries, resulting in lower tax rates, including on profits generated from sales in the U.S.
As the CEO or CFO of a large, publicly traded company, the view of AbbVie's actions would depend on various factors and perspectives. Here are some considerations:
- Legality: The legality of AbbVie's actions would depend on the specific tax laws and regulations in place. While the report criticizes AbbVie's tax avoidance strategies, it does not explicitly state that the company's actions are illegal. As a CEO or CFO, it would be important to ensure compliance with existing laws and regulations.
- Right or Wrong: Whether AbbVie's actions are considered right or wrong can be subjective. From a shareholder perspective, minimizing tax burdens could be seen as a responsible financial strategy, as it maximizes profits. However, from a societal standpoint, aggressive tax avoidance practices may be viewed negatively, as they can be seen as shifting the tax burden onto others and undermining public services.
- Morality: The morality of AbbVie's actions is also a subjective matter. Some might argue that the company has a moral obligation to pay its fair share of taxes, contributing to the communities and countries where it operates. Others might argue that the company's primary responsibility is to its shareholders, and minimizing tax liabilities is a legitimate way to fulfill that duty.
- Tax Changes and Global Agreement: The report aims to support U.S. tax changes and the implementation of a global agreement for a 15% minimum tax. As a CEO or CFO, it would be important to closely monitor proposed tax reforms and ensure compliance with any new regulations that may come into effect.
Ultimately, the view of AbbVie's actions would depend on the individual's ethical framework, legal obligations, and fiduciary responsibilities to the company and its stakeholders. It is important for executives to consider the potential reputational risks and public perception associated with aggressive tax avoidance practices, as they can have long-term implications for the company's brand and relationships with stakeholders.
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