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Friday, July 29, 2005

Corporate Welfare


Bristol-Myers Squibb, more commonly known to us as BMS, has reported second quarter profits of 1 billion US dollars. More importantly, however, is all of that is TAX FREE.

"Overall results were helped largely by $294 million in tax benefits that enabled the company to pay no taxes."

So, let me get this straight - a working stiff has to pay his share of taxes on the lousy 30k that he grosses annually, so that a huge multinational corporation (henceforth, MNC) can pay zero?

This, my friends is what we refer to when we're talking about corporate welfare. Let us reform corporate welfare as we know it, as they did with common welfare. From this point on, we shall refer to it at wealthfare. Because that is precisely what it is - a government hand out to companies that are very profitable.

So, I suggest that we demand that these hand outs to corporate billionaires end immediately.

"This country has a $6 trillion national debt, a growing deficit and is borrowing money from the Social Security Trust Fund in order to fund government services. We can no longer afford to provide over $125 billion every year in corporate welfare -- tax breaks, subsidies and other wasteful spending -- that goes to some of the largest, most profitable corporations in America." ---Congressman Bernie Sanders, CommonDreams.org May 15th, 2002

"Due both to lower basic tax rates and to myriad loopholes, corporate taxes fell from one-third of total federal revenues in 1953 to less than 10% today. Were corporations paying as much tax now as they did in the 1950s, the government would take in another $US250 billion a year - more than the entire budget deficit."
--Chuck Collins

Let us call our attention back to our wonderful friend, Bristol-Myers Squibb. With 1 quarter profits at $1 billion, that means that they are profiting an estimated $4 billion annually. This is out of control.

-- Sales of REYATAZ(R), a protease inhibitor for the treatment of HIV, increased 115%, including a 3% favorable foreign exchange impact, to $183 million in the second quarter of 2005 from $85 million in the same period last year. REYATAZ(R) has achieved a monthly new prescription share of the U.S. protease inhibitors market of approximately 30%. (All of that advertising is paying off.) Sales in Europe continued to grow since its introduction in the second quarter of 2004, achieving sales of $52 million in the second quarter of 2005.

-- Sales of SUSTIVA(R), a non-nucleoside reverse transcriptase inhibitor for the treatment of HIV, increased 9%, including a 2% favorable foreign exchange impact, to $167 million in the second quarter of 2005 from $153 million in the same period last year, primarily due to U.S. prescription growth of approximately 5% for the second quarter of 2005.


Global Sales: $19.4 billion
Charitable Donations: Nearly $650 million in product and cash contributions
So this means that the generous, tax free, corporate billionaires were nice enough to give roughly 3.5% of their total sales

Here's the contact information for this lovely little company that provides us with the necessary toxins Reyataz and Sustiva:

Chief Executive Officer:
Peter R. Dolan
Headquarters:
345 Park Avenue
New York, New York, USA 10154-0037
212-546-4000
Call, write or email them on their web form and ask them why they do not have to pay taxes, while the rest of us, who can barely afford their products do. Further, if some PR person tries to tell you about how much charitable giving they do, remind them that it only constitutes 3.5% of their total gross receipts!

55 Comments:

At Sat Jul 30, 02:21:00 PM GMT+10, Anonymous Anonymous said...

Based on detailed information provided by BMS, the company did pay income taxes on the $1 billion it earned this quarter.

1. There would have to be some unusual events for a corporation to earn $1 billion in one quarter and not pay any taxes on it. Yes, there are corporate loopholes but none of these loopholes reduce a company's tax burden to zero. BMS provides a detailed analysis of its earnings, and they specifically discuss their net tax benefit for the quarter. The company had some disputes with the IRS over previous taxes paid to the government. The company believed it had overpaid taxes in earlier years. The IRS disputed the claim. BMS took the IRS to court and won. They received their refund on the overpayment of taxes in the current quarter. So while it may appear as though they did not pay any taxes on earnings of a $1 billion, they actually did, it was just offset by a very significant refund of taxes from previous periods.

The other event that reduced their taxes was the company repatriated cash from foreign subsidiaries and received a tax deduction from prior earnings that generated that cash. This was a one-time event and essentially was a refund of prior taxes paid on earnings that the company recently brought back to the US at a lower tax rate than they previously paid the taxes on. Both of these event resulted in the company having higher tax refunds than taxes paid, which why on the surface it appears that they did not pay taxes, but they actually did.

2. If you look at prior year financial statements (say 2004). BMS earned $4.4 billion for the year and paid $1.5 billion in taxes (roughly 35%). In 2003 the company earned $4.7 billion and paid $1.2 billion in taxes.

3. Unless the company is being accused of illegally not paying taxes, I believe these complaints should be addressed to the government. The government decides the tax policies that the company is merely taking advantage of. It's sorta like complaining that your neighbor is getting a tax break by deducting the interest on his mortgage. If the government allows a homeowner to deduct interest then you can't really fault a homeowner for doing it.

But the key here is that I believe BMS does pay its taxes as reflected in the 2004 and 2003 financial statements. There were special circumstances that occurred this quarter that resulted in what appeared to have been a tax free quarter for the company that really wasn't.

Overall US companies now pay higher taxes than corporation in most of other countries, even Europe and Australia. This is because those nations have been reducing their corporate income tax rate in an effort to boost their economic growth to match that of the US. Because our growth has been much higher we haven't resulted in significant tax reductions to corporate rates. There are some that argue that we should at least match the tax rates of other nations to ensure our corporations don't move offshore and potentially increasing our unemployment rates. Just another view to consider.

 
At Sat Jul 30, 10:36:00 PM GMT+10, Blogger ronnie said...

Dear Anonymous,

Are you a PR rep for the company in question? If so, please offer that disclaimer. In any event - the company paid no taxes according to the New York Times article, as a result of recent tax law changes.

So, I don't have the same information that you have. Perhaps, you better send out a press release to the New York Times.

 
At Sun Jul 31, 12:30:00 AM GMT+10, Anonymous Anonymous said...

I do not work for BMS. I do not own BMS stock. I have no interest in protecting BMS and would not receive any financial gain from responding to your blog. (Not sure why BMS would be trolling blogs anyway).

Reporters can get the facts wrong or mischarterize a situation, which is why I rarely take a news article at its face value, (though the New York Times is usually a very good paper). I like to do my own research. Not only does it help me to learn more about a story, but I have often seen that reporters make a lot of mistakes, or in the interest of time will not report all the facts (like the Times reporter not mentioning reason #1).

Yes, you actually do have access to the same information that I do. Every company is required to file their financial statements with the SEC, those financial statements will include a detailed analysis of their results of operations. You can get the information from the SEC directly or on the company's website.

When the Times story mentioned a change in the tax law, they were most likely referring to the 2nd reason that I mentioned above. There was a change in the tax law that resulted in companies paying lower taxes on cash repartiated into the country than they initially paid on those earnings when they earned them. So that part they were correct. But that's why I said that you can't blame BMS for taking advantage of that change in tax law. You can blame the government, but I wouldn't blame the company.

It's no different than when the government changed the tax laws and allowed individuals to deduct interest paid on student loans, which resulted in lower taxes. I wouldn't blame an individual for taking advantage of that opportunity to lower their tax bill.

I'm not sure I understand your final statement (sending a press release), unless you are still referring to me working for BMS. Again, I don't and it is highly unlikely a company is trolling blogs.

 
At Sun Jul 31, 01:31:00 AM GMT+10, Blogger ronnie said...

Perhaps, the company cannot be blamed for taking advantage of tax laws.

However, if they are earning $1 billion/quarter in PROFIT TAX FREE and only giving 3.5% of their gross receipts to charitable giving, then I call on that company to do more!

And, yes, I call on the government to end Corporate Welfare as We Know it, as they did with Common Welfare.

If a mom with 3 babies has to be kicked off of welfare after 3 years, then why should a very profitable company be getting tax breaks.

And, let us not forget, that they benefit, largely from NIH sponsored research. Then, act like they have to pass the cost of that reseach onto the consumers of their products, very misleading.

I'm sorry, if you are not a representative of BMS. Based on your analysis, I believed that you were, but since you are not, your opinions here are more than welcome and encouraged!

Keep posting and keep this conversation going.

 
At Sun Jul 31, 03:40:00 AM GMT+10, Blogger Luis Blasini said...

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At Sun Jul 31, 10:17:00 AM GMT+10, Blogger David said...

Well Ronnie...it appears someone else does there homework too. What a fabulous and hopefully on-going dialogue about corporate America and tax breaks. It would interesting to know just what programs BMS supports with their minimal 3%....Did you note where they spent their charitable tidbit?
I thoroughly enjoy intelligent and informed dialogues...Keep it going!

 
At Sun Jul 31, 04:25:00 PM GMT+10, Blogger Bucko said...

We are beholden to Big Pharma for our lives and we have the right to question the motovations and philanthropic intentions behind the Big Brother mask.

Every post here is an attempt to reclaim the dialog after a long decade of complacency and stifled dissent on the parts of both the gay community and the smaller subset of HIV positives within it.

 
At Sun Jul 31, 05:36:00 PM GMT+10, Blogger Matty the Damned said...

it is highly unlikely a company is trolling blogs.

So you say anonymous. I have known large companies (and other organisations) to go the most bizarre limits in the interests of PR.

What gives you such confidence that a company isn't trolling blogs?

MtD

 
At Sun Jul 31, 11:17:00 PM GMT+10, Blogger ronnie said...

David,

It is unfortunate that in BMS' quartly report to the SEC and their own press release (where the information came from) they do not share what they do with that 3.5%.

One thing I'm guessing, is their indigent care program. Where one fills out humiliating forms and begs them for free drugs. Now, BMS, to their credit, is pretty good about this program.

The only problem I have with the way this program is managed is they get to account for the retail cost of the drug that they are giving away, not the actual cost to them. Since there is no opportunity cost in giving away free medicine (the person couldn't afford it anyways, and there isn't a limited supply) it is my opinion that they should only be able to account for the actual cost to them.

 
At Tue Aug 02, 03:31:00 PM GMT+10, Anonymous Anonymous said...

Fact is, I have no connection to BMS (or any other pharma company). However, you are free to assume whatever you like.

The information that I found is publicly available. Anyone can search a company's financial statements either via www.sec.gov or at the company's website.

Ronnie- I don't know the average donation rate for most corporations, but 3.5% does seem awfully low. I believe that is something to write to them about. However, I believe we should also encourage their shareholders to speak out (including the large governmental institutions that probably hold a significant share of the company's outstanding shares). The owners of a company are much more likely to have sway with management than Joe Blow on the street. Many large institutions (particularly those in California) are starting to use their ownership to influence companies to change their policies. That's another route to consider. Find out who owns BMS (also publicly available information) and question them why they have an investment in a company that only donates 3.5% of its earnings to charity.

Bucko- I believe that our relationship with the drug industry (which to be honest involves many more companies than the few largest ones that gets all the attention) is very complex. I would be willing to bet that they need us almost as much as we need them. We may not have the current administration in our back pocket, but I don't think we are powerless or that they have all the control. I agree we do have the right to ask question, and should exercise that right extensively. But it's also about asking the right questions and addressing those questions to the right people.

Corporate taxation is a balancing act. Yes, companies should pay their fair share. However, we also have to consider the fact that a corporation can be based anywhere in the world. And because of that we have to compete with other nations and right now our corporate taxes are actually higher than most other industrialized nations. We can only increase taxes so much before companies start moving operations elsewhere. That's not to say that we shouldn't question certain loopholes, but it's just another factor that we have to consider when discussing corporate tax rates. In addition, not all loopholes are bad, contrary to popular belief. For example, one such loophole that many companies take advantage of is having operations located in certain high unemployment areas. Having your operations based in an "enterprise zone" can lower your taxes. In this case, you will end up with companies paying lower taxes, however you'll bring jobs to economically depressed communities. That's why we have all these sorts of loopholes. It's the government trying to encourage some sort of activity and did so by providing a tax incentive.

 
At Wed Aug 03, 03:20:00 AM GMT+10, Blogger Bucko said...

Bucko- I believe that our relationship with the drug industry (which to be honest involves many more companies than the few largest ones that gets all the attention) is very complex.

Were it not for the "miracle drugs" (of which I take four everyday, plus four others for the pesky side-effects) I am certain that I would have died many years ago. This goes way beyond complexity.
**********************************
I would be willing to bet that they need us almost as much as we need them.

While HIV meds make up a sizeble percentage of revenue, they make the really serious big bucks on drugs that help the general population (re: Lipitor, Viagra, etc, etc). We are merely a profitable hobby and sideline.
**********************************
We may not have the current administration in our back pocket, but I don't think we are powerless or that they have all the control.

ACT UP was formed, at least in part, to counter the Reagan administration's total silence. But those were different times, before 9/11. One of the consequences of the Patriot Act is the chilling of activism by criminalizing dissent at the discretion of those who have very different world-views than us. I predict that, over the next few years, we will see at least one domestic activist organization (and it won't be Project Rescue) come under federal hammer. I hope I'm wrong, but I fear not.
**********************************
I agree we do have the right to ask question, and should exercise that right extensively. But it's also about asking the right questions and addressing those questions to the right people.

Agreed. I'm hoping that those who are younger, stronger and have not meen ground down to a demoralized pulp after 25 years of uncertainty and loss caused by HIV/AIDS will take up the ball and run with it.

You, anonymous, seem like a brilliant candidate for the job.

Peace-
B

 
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