Eli Lilly and Co. got called out in a recent report on companies that took advantage of the 2004 tax holiday on foreign profits and have since slashed jobs.
The 2004 tax holiday was supposed to induce big companies—particularly those in research and development fields—to hire more Americans. Of the 843 companies that took advantage of the tax holiday, the liberal think tank Institute for Policy Studies identified only 56 that have since reduced their global work forces.
Lilly is among those companies the Washington, D.C.-based organizations labels “job killers.” The Indianapolis-based drugmaker repatriated $8 billion in foreign profits in 2004, having them taxed at a 5-percent rate instead of the 35 percent it would have paid without the holiday.
That same year, Lilly hit its peak employment of more than 46,000 global workers. But from the end of 2004 to the end of 2010, Lilly eliminated 6,150 jobs, according to the institute, which culled figures from companies’ annual reports.
Lilly actually cut 6,350 jobs in the United States, according to the institute’s figures, while adding 200 in foreign markets.
“This study of corporate beneficiaries of the 2004 tax holiday reveals that these companies not only failed to create long-term, stable jobs, but were huge job destroyers,” institute staff members wrote in an executive summary of the report. The institute is arguing against legislation currently pending in Congress that would institute a new tax holiday on the repatriation of foreign profits.
Of course, the institute ignores the financial crisis and recession of 2008-2009, which prompted some of the biggest job cuts. While Lilly was one of 13 companies the institute could identify as having cut U.S. jobs from 2004 to 2006, the company’s biggest cuts have come since September 2009, when Lilly announced 5,500 layoffs.
Those cuts were also prompted not by Lilly’s poor business results—the company is making more money than ever—but by the cutoff in revenue that will begin this month when its best-selling drug Zyprexa loses its patent protection in the United States and Europe.