Thursday, October 6, 2016

Update: The Senior Policy Analyst At Citizens For Tax Justice Has Explained The Pfizer Figure

I've decided to run this item as a separate (new) post -- but will link to it, in the original.

Based on the below response, I do concur with the analysis and methods used by CTJ/ITEP.

The report's authors essentially "back into" their Pfizer and Apple permanent foreign cash hoard numbers, by forcing each, from the contingent US tax liabilities these companies report, but do not book, should they have to repatriate all the cash they earn overseas, without a beneficial tax holiday of any sort. So, the contingent, unreserved, non-recorded liability for taxes disclosed in the companies' SEC filings is essentially tripled by the report authors, to arrive at their guesses -- at total foreign cash hoarded. [But they did not do that as to Merck, it seems clear. So it may not strictly be apples to. . . Apple, either. Grin.]

And still, that all makes the whompingly out-sized $200 billion figure at least reasonably probable as a reality, for Pfizer, by year end 2016. Whether the company is getting there by charging aggressive patent royalty rates, internally, for transfer purposes, or in some other fashion, will remain a mystery -- because there is no required disclosure on that topic (as I said in my first post on it). But here is the answer I received:

. . . .For Apple, we are using its cash, cash equivalents, etc. in foreign subsidiaries as reported in its latest 10-Q (not 10-K) filing (so that would be as of June 30, 2016). We use this figure because Apple says in its note that it is all taxable -- and because we know that Apple reports a substantial amount of untaxed earnings outside their "permanently reinvested earnings" figures (i.e., foreign earnings, from the perspective of the US IRS). That is so, because Apple reports a huge deferred (i.e., non-recorded) tax liability for unremitted earnings. . . .

Similarly, Pfizer reports an enormous deferred tax liability for unremitted foreign earnings. To get an estimate of Pfizer's total untaxed foreign earnings, we use its average foreign tax rate for the past five years to calculate how much income caused Pfizer to have that level of reported deferred tax liability (again, unrecorded). A lot more detail on this is included in a different report on Pfizer. . . .

So there you have it. I will thus stand by my story of this morning. Onward -- just beaming now. . . .


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