Paradise profits : tax planning in multinational companies : a case study of Pfizer Inc.

2017

In recent years, it has become increasingly evident that current tax regulations are not properly

equipped to handle the business structures of multinational companies. A number of

revelations and leakages have exposed how such companies, often from the US, make use of

tax minimization strategies in order to shift profits and reduce tax liabilities. In this thesis, we

examine the inner workings of these arrangements, and analyze the extent of aggressive tax

planning in the pharmaceutical company Pfizer. In our preliminary analysis, we find that the

company is able to defer large amounts of income tax by stashing $187 billion in profits

offshore, ultimately resulting in an effective tax rate of 0.28 percent in 2016. In our work to

identify Pfizer’s methods of profit shifting, we find evidence of, inter alia, tax-incentivized

location of patents, excessive tax burden in the US and a tax-exempt CV/BV conduit structure

in the Netherlands. We thereby conclude that Pfizer exploits loopholes in international tax

regulations in order to significantly reduce their tax liability.