Unfair tax avoidance by pharmaceutical companies behind some of Australia’s most trusted brands – including Band Aid, Centrum and ChapStick – is depriving Australia’s coffers of an estimated $215 million a year – and developing countries of more than $146 million – in urgently needed funds to help tackle poverty, according to new Oxfam research.
Oxfam’s report, Prescription for Poverty, published today, examines the financial activities of four of the world’s largest global pharmaceutical companies – Johnson & Johnson, Pfizer, Merck & Co (known as Merck Sharp & Dohme or MSD in Australia) and Abbott. It found that in Australia, the four are estimated to have unfairly avoided paying $215 million in taxes a year between 2013 and 2015. Such practices, while not illegal, are not in line with the spirit of the law.
Oxfam Australia Chief Executive Helen Szoke said the $215 million estimated to be avoided in tax each year was equal to the cost of more than five million prescription scripts in Australia, or the equivalent of almost the full cost of Medicare’s urgent after-hours home visits service in 2016.
“Australians expect that the best known and trusted pharmaceutical brands would be doing the right thing when it comes to paying their fair share in tax, yet Oxfam’s research shows these four companies seem to be doing the exact opposite,” Dr Szoke said.
“On top of this, in seven developing countries in dire need of more public health funding – and where women and girls are disproportionally affected by healthcare gaps and lack of access to medicine – these four giants appear to be avoiding around $146 million in taxes a year.
“To put it in perspective, if this amount were invested in healthcare in these countries, this could pay for 10 million girls to be vaccinated against the HPV virus that causes cervical cancer and kills one woman every two minutes around the world.”
And, across nine wealthy countries including Australia, Oxfam found Johnson & Johnson, Pfizer, Merck & Co and Abbott appear to have avoided $4.8 billion a year in tax revenues over the period.
All four firms were found to have links to known tax havens where their profit margins for the 2013-15 period are significantly higher than in countries with standard tax rates.
Overall, the firms posted a 7 per cent loss in Australia for 2013-15, but somehow made an average of 31 per cent profit in four tax havens, where they are charged little or no tax on those profits. It’s a similar story for other countries with standard tax rates, where the average profits booked by the firms was 5-7 per cent.
“It begs the question, why are profits so low in places like Australia with ordinary tax rates, but so high in some of the world’s worst tax havens?” Dr Szoke said.
“This Oxfam report again highlights the broken global tax system that is driving an inequality gap and further entrenching communities in poverty. To end tax avoidance once and for all, Oxfam is calling on the Australian Government to implement public country-by-country reporting of financial information for all large multinational companies operating in Australia. Shedding light on practices like these will help to hold companies to account – so that tax is paid where companies really make profit.”
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