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Why Pfizer Is In Puerto Rico… Pfizer Wages…U.S. Tax Amnesty Pushes Eli Lilly Into The Red

Why Pfizer Is In Puerto Rico

Joe Rosado

January 24 2005
Copyright © 2005 SO FL SUN-SENTINEL. All rights reserved.

To better understand Pfizer wages and the decision of the company to locate in Puerto Rico, one needs a better understanding of some basic truths.

Puerto Rico ("rich port") is a commonweath of the U.S., and its citizens are citizens of the United States by birth. The commonweath has a standard of living that equals South Florida and the literacy rate is over 95 percent. The quality of that education is, on many levels, superior to South Florida schools.

The commonwealth -- as do states on the mainland -- provides economic incentives for American companies to locate there: land, a 10-year tax abatement, an educated, highly skilled, hard-working workforce, and a government as stable as the USA's.

Puerto Rico is not a Third World banana republic.

The wages Pfizer pays are in line with the qualifications of the people and the quality of the work they do. We in the United States do pay a lot for our drugs and that is a problem. The wages paid to Puerto Ricans and mainland workers are not the cause of this.

Pfizer Wages

Kim Siekmann

January 18 2005
Copyright © 2005 SO FL SUN-SENTINEL. All rights reserved.

Was it just me or did anyone else read the article about Pfizer Labs paying employees in Puerto Rico $15 per hour, and think this was absurd?

Why, oh why is Pfizer manufacturing in Puerto Rico and not the mainland USA? Last time I checked, $15 per hour was a really good wage here.

Is it any wonder we pay so much for drugs, when they are paying the wages they are paying?

US Tax Amnesty Pushes Eli Lilly Into The Red


January 27 2005
Copyright © 2005 The Financial Times Limited. All rights reserved.

Eli Lilly took advantage of a US tax amnesty on foreign earnings yesterday, announcing that it would repatriate Dollars 8bn that has accumulated in countries with lower corporate tax rates.

The drugs manufacturer is among the first multi-nationals to use this tax break, which stems from the American Jobs Creation Act passed in October.

Johnson & Johnson made provisions on Tuesday to return Dollars 11bn and Bristol-Myers Squibb is expected to report similar plans when it announces earnings today.

In total, analysts estimate Dollars 320bn in overseas earnings will be repatriated by US companies this year. Some speculate that it may even help bolster the dollar exchange rate, depending on how much of the money is held in other currencies.

Overseas earnings have grown particularly large in the pharmaceuticals and technology industries because companies have shifted a large portion of their intellectual property ownership and manufacturing operations to low tax jurisdictions such as Ireland, Singapore and Puerto Rico.

If returned to the US in the form of dividends to the parent company, this money would normally face US corporate tax rates of 35 per cent minus any tax paid locally.

But Congress agreed a one-off amnesty last year to end what was perceived as a disincentive for domestic US investment. For one year, companies are able to bring this money back at an effective tax rate of 5.25 per cent.

Nevertheless this presents companies with a one-off charge, which analysts say is a real cost reflecting temporarily depressed tax rates in previous years.

In Lilly's case, a Dollars 465m charge in the fourth quarter wiped out all its profits for the period. Operating income also fell by 48 per cent to Dollars 451m, due largely to Dollars 494m in asset impairments, restructuring and other special charges,

Eli Lilly had a net loss of Dollars 2.4m and no diluted earnings per share, primarily due to the Dollars 465m tax expense charge for money due to be repatriated in 2005.

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