In 2024, Pfizer generated the lion’s share of its revenue in the U.S., yet the company claimed it had no U.S. income and that it paid most of its taxes overseas.
The question is: Where?
Groundbreaking new accounting standards set to take effect in 2025 should mean we get answers quite soon. But legislation making its way through the House of Representatives would prevent this information from ever reaching the public eye.
The Securities and Exchange Commission (SEC) entrusts the Financial Accounting Standards Board (FASB) to monitor and establish accounting standards for publicly traded companies like Pfizer in the U.S. These rules are meant to provide information needed to investors so that they can make sound decisions and ensure that investment flows towards productive opportunities.
In 2023, at the request of investors, FASB unveiled new accounting standards requiring companies to publicly break down their tax payments by jurisdiction. (“Jurisdiction” in this context typically refers to a country, though it can also apply to territories with independent tax systems, including tax havens). Companies would begin disclosing this information in forthcoming Annual Reports submitted to the SEC.
These updated standards would require companies like Pfizer to provide in-depth, country-by-country breakdowns of their taxes, giving a peek into the potential tax-dodging tactics of multinational enterprises. However, Republicans on the House Appropriations Committee, the panel responsible for passing funding for the SEC and FASB, are holding FASB hostage in exchange for nixing the standards update in their most recent funding bill.
Section 529 of the bill states: “None of the funds made available by this Act may be used to review or approve the budget for the Financial Accounting Standards Board (FASB) … until the FASB withdraws the Accounting Standards Update on Income Tax Disclosures issued in December 2023 (No. 2023-09).”
Since the bill allocates funding for federal spending and programs, the implications for FASB are buried; none of the proposed amendments to the bill prevented the withholding of funds, and it comfortably passed the committee vote on September 3. Now; it moves to the House Floor.
The Democrats’ silence reveals that they are either ignorant or actively hostile to one of the most significant advances in corporate tax transparency. Holding FASB hostage to nix these disclosures blatantly disregards the interests of investors who want to know what they are investing in – and members of the general public who want to identify corporate tax dodging.
Given the diminished audit capacity of the IRS, the new FASB standards would at least give the public some transparency and require corporations to adhere to a higher standard of disclosure. The Financial Accountability and Corporate Transparency (FACT) Coalition highlights how detailed tax information could prevent companies from keeping investors in the dark before it’s too late. Shareholders of several multinational corporations have introduced proposals requesting tax transparency, highlighting its importance for investors. Finally, FASB made clear that the update was prompted by investor sentiment, stating that the “amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures.”
The House GOP’s hatchet job on disclosures flies in the face of public opinion. Poll after poll reflects American’s frustrations with corporations not paying their fair share. Therefore, the silent gutting of the most significant improvement to public tax disclosure feels grimly appropriate.
Despite scrutiny, corporations have continued funneling their profits to tax havens and shielding their practices from public view. In 2024, Pfizer disclosed 101 combined subsidiaries located in the tax havens of the Netherlands and Delaware. In contrast, Amazon only disclosed 9 total subsidiaries, with 6 in Delaware, even though the company clearly has operations in plenty of international tax havens.
In both cases, the updated FASB standard would shed light on the purposefully hidden and intricate tax practices of these companies. Ultimately, the public and investors stand to gain clarity while corporate tax dodgers stand to lose their cover, making this a reform that Congress must defend rather than dismantle.
