At INTERPHEX in early May, outsourcing guru Jim Miller of PharmSource gave a presentation on new bio/pharma business models, and mentioned that tax breaks in different countries constitute a challenge for CMOs. If a country creates a big tax advantage for a large pharma, the large pharma may find it more beneficial to build a new facility or upgrade an existing one and insource more of its work.
A number of CMOs I met with during INTERPHEX wanted to talk to me about that point, to the exclusion of the rest of the presentation. Like most Americans, I do my fair share of complaining about taxes, but I get the feeling that Jim struck a nerve with that topic.
Of course, taxes are a pretty sensitive matter. We all feel that we pay too much, someone else should be paying more, and the money doesn’t get spent wisely. Still, we make our way and render unto Caesar, paying out numbers unreflected in this year’s Salary Survey. Few of us are in any position to do anything about it, at least not like Eduardo Saverin did.
The news recently broke that Mr. Saverin, co-founder of Facebook, has renounced his U.S. citizenship to become a . . . Singaporean? The move was made last September, but its announcement coincided with Facebook’s IPO. The argument is that Mr. Saverin chose to reside in Singapore in order to avoid capital gains taxes in the years ahead, since his shares in Facebook are valued between $2 or $4 billion. Singapore has a top income tax of 20%, no capital gains tax, and no estate tax, for Mr. Saverin’s heirs.
Mr. Saverin was pilloried in the press by people who would likely have done the same thing if they were in his shoes, and the nudnik senior senator from New York, Charles Schumer, has proposed a law to heavily penalize people who try to make such a move. It was a grandstanding gesture by a senator renowned for grandstanding, so it likely won’t be enacted into law. Still, Mr. Saverin may not be able to set foot in the U.S. again, since immigration law bars re-entry by people who renounced citizenship for tax purposes.
The same week that Mr. Saverin’s (alleged) tax-dodge went public, my wife and I went to see Willie Nelson in concert. It was a fantastic experience; at 79, Mr. Nelson’s a living legend and I was amazed to see him perform for nearly 90 minutes without a break. He managed to evoke some beautiful sound from “Trigger,” a guitar that’s slightly older than I am, hitting his peak with a long, gorgeous, South-western solo leading into I Never Cared For You.
On the drive home, we discussed why a man five years older than my dad is still out playing shows. We both recalled that he had some tax problems in the past, so my wife looked up his tax history online. As it turns out, the IRS came after him for an astounding $32 million in unpaid taxes back in the early ’90s, one of the largest penalties ever levied at a private individual.* That got negotiated down, and Mr. Nelson eventually won an undisclosed settlement from his accounting firm, which allegedly advised him to invest his money in some dodgy tax shelters, but he still went through the ignominy of having his assets stripped and auctioned before he was able to pay off his debt and start over.
Which may help explain why he’s on the road again.
I hope when I’m his age I’ll be even a quarter as good at whatever the heck I do as he is at playing the guitar. But I’m also hoping I won’t have to be.
*Big pharma, needless to say, has Mr. Nelson beat when it comes to huge tax penalties.
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What I’m Reading
A Life Worth Ending
Michael Wolff, New York – bit.ly/LolVtq
Comment: More “Healthcare” than “Pharma,” Mr. Wolff writes about the awful process of dealing with his mother’s decline into dementia and invalidity. There’s a bit of self-centeredness to the article, but it raises significant questions about the sustainability of massive healthcare spending on the elderly.
Marcus Aurelius – amzn.to/JCBzgD
Comment: A second-century Roman emperor’s collection of thoughts about Stoicism, death, service, the unity of the cosmos, the primacy of reason, and how to live in a world with other people. I’m somewhat embarrassed to have gotten to this so late in my game.
What are you reading?
Let me know — at firstname.lastname@example.org, www.goodreads.com/groth, www.linkedin.com/groups?gid=1775433 or www.facebook.com/contractpharma — and the first respondent wins a prize!