Multinational pharmaceutical manufacturer Pfizer announced massive profits this week on the back of large corporate tax cuts in the United States.
In a statement to investors, Pfizer reported fourth-quarter earnings of $12.3 bn, a significant increase on the $775 million earned in the prior year.
While some of this increase in income was due to additional drug sales, the majority came to due tax reductions. According to information released by the company, Pfizer gained $11bn in additional profit due to the new tax law over this period.
Previously the company paid a tax rate of approximately 23%, however following changes to the US tax code by the Trump Administration, the company will now only see themselves paying a rate of 17%.
Appearing to respond positively to these tax changes, the company announced that it would invest $5bn into the US over the next five years, as well as pay an additional $15bn in taxes over the next 8 years as it brings funds kept overseas back to the US.
Furthermore, the company plans to make a one-time donation of $200mn to the Pfizer Foundation, an organization that provides grant and investment funding to support organizations and social entrepreneurs in an effort to improve healthcare delivery.
In addition, Pfizer will pay a $500mn contribution to its U.S. pension plan in 2018, and allocate $100mn to employee bonuses in the wake of the tax windfall.
“The system that had been in place put U.S.-based multinational companies at a competitive disadvantage vis-à-vis foreign competitors with regard to the tax rate and international access to the capital,” Pfizer’s CEO Ian Read told investors during an earnings call.
“The new tax code addresses these issues and helps level the playing field to make U.S. companies more competitive.”
Trump praises tax changes
The announcement by Pfizer that it would invest in US-based manufacturing with some of its new-found cash from this tax change would appear to fit with President Trump’s America First policies.
Similar moves by other companies drew praise during yesterday’s State of the Union speech.
“Since we passed tax cuts, roughly 3 million workers have already gotten tax cut bonuses, many of them thousands and thousands of dollars per worker. And it’s getting more every month, every week,” said Trump.