Amgen CEO Robert Bradway told President Trump at today's White House meeting that his company is adding 1,600 jobs in the U.S. this year.Amgen had $21,662 million in sales in 2015 with $7978 million in profits. Its worldwide taxes were only $1039 million for an effective tax rate of only 13 percent. How did they pull the trick off? Their 10-K filing is a little sparse in information but does admit:
The effective tax rates for the years ended December 31, 2015, 2014 and 2013, are different from the federal statutory rates primarily as a result of indefinitely invested earnings of our foreign operations. We do not provide for U.S. income taxes on undistributed earnings of our foreign operations that are intended to be invested indefinitely outside the United States.Did the White House discuss this massive base erosion to tax havens with no repatriation of earnings? Of course one has to wonder about their transfer pricing profile. All I could get from their 10-K was:
We perform most of our bulk manufacturing, formulation, fill and finish activities in our Puerto Rico facility and also conduct finish activities in the Netherlands. We also utilize third-party contract manufacturers to supplement the bulk, formulation, fill, and/or packaging of certain Amgen principal products ... We operate distribution centers in the United States—principally in Kentucky and California—and the Netherlands for worldwide distribution of the majority of our commercial and clinical products. We also use third-party distributors to supplement distribution of our products worldwide ... We have major R&D centers in several locations throughout the United States (including Thousand Oaks and San Francisco, California and Cambridge, Massachusetts), Iceland and in the United Kingdom, as well as smaller research centers and development facilities globally.So we have three basic functions here: (1) production offshore; (2) local distribution; and (3) R&D done in the U.S. Amgen’s profit margin is near 37 percent, which should tell us most of its profits are attributable to its product intangibles, which were developed here. And yet most of the profits are sourced to tax havens. As we spend so much time debating the various aspects of the Destination-Based Cash Flow Tax, multinationals like Amgen are very happy that we are not discussing their transfer pricing.