President Joe Biden’s tax plan laid out last week will most likely hit Pharmaceutical and technology companies particularly hard. The challenge for legislators will minimize loopholes that could diminish the impact, according to tax experts. Most of the valuable assets at Pharmaceutical ad tech companies are intellectual property like patents and algorithms. These are intangibles that make it easier for them to structure global operations to minimize tax costs.
Sectors like retail or agriculture have many physical assets which can easily be moved to lower-tax countries. Republicans and Democrats have sought to bolster the US tax take from the company’s overseas operations. Donald Trump’s 2017 overhaul had measures to do that. However, Biden takes a stricter approach with a 21% minimum tax on foreign profits and a 15% minimum levy on profits reported on financial statements.
Matthew Gardner, a senior fellow at the Institute on Taxation and Economic Policy, said, “This is aiming to prevent gaming the system entirely. The party does seem like it’s over.” The 2017 tax overhaul by Trump created a system where US companies paid about half the taxes abroad that they did at home. The former regime was replaced when the corporations could defer paying taxes on foreign profits. However, they did not bring that money back to the United States.