Pharmaceutical Industry:

Tax Benefits of Operating in Puerto Rico

GGD-92-72BR: Published: May 4, 1992. Publicly Released: May 14, 1992.

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Pursuant to a congressional request, GAO provided information about tax benefits that the pharmaceutical industry obtained from operating in Puerto Rico in the 1980s.

GAO found that: (1) the pharmaceutical industry received a large share of tax benefits from section 936 of the Internal Revenue Code compared to the number of jobs directly created and the amount of compensation the industry created; (2) tax benefits that the pharmaceutical industry received per employee were three to four times greater than those received by the industry with the next greatest amount of benefits; (3) industry representatives stated that other such employment-related information as the number of jobs created in companies servicing pharmaceutical corporations needs to be considered in evaluating the benefits of section 936; (4) individual pharmaceutical companies differed markedly in the level of taxes they saved by operating in Puerto Rico; and (5) 17 of the 21 most frequently prescribed drugs in the United States in 1990 were authorized for manufacture in Puerto Rico.

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