U.S. tax reform or not, offshore beckons

Some of the greatest minds in the pharma manufacturing business--the readers of this newsletter--have shared their divergent views of our recent story, "The other dark side of Merck's 13,000 layoffs." The story suggests pharma manufacturers are moving offshore in pursuit of not just low wages, but also lower taxes. In fact, it claims that U.S. corporate tax laws are perhaps the biggest driver of manufacturing offshore.

Not so fast, says reader "Linus." "If corporations bring money back and invest it into expansion here, then it's a capital expenditure [emphasis Pauling's] and they aren't paying taxes on it!"

"Jane" goes into some detail describing why taxes are but a minor aspect of manufacturing migration. "Blaming taxes for companies moving or sending jobs ex-U.S. is nonsense, and smoke and mirrors for corporate leaders' lack of vision," she comments. "The algorithm in the U.S. of low taxes and high product costs is a dangerous combination of corporate welfare and a corporate greed that parallels that of Wall Street... Taxes should be paid."

Resignation best describes "Anon's" response: "The 'tax climate' argument is partly true. But the truth of it is wages [elsewhere] are cheaper. If taxes are zero here but a worker is half the cost in a developing country, you're still up ahead going overseas."

"Ed" is fueled by anger and disgust. "We have become $ellouts. It is a true shame and a sham...not the American [emphasis Ed's] way, but the Yuan Way!"

"Celtic" is more practical, wondering if Merck considered relocating those employees who were cut in the U.S. "I suspect many would be willing to move to survive, even if they incurred some of the relocation expenses."

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