The pharmaceutical companies behind brands such as Baby Oil, Band-Aid, Centrum and Chapstick have avoided paying about $215m in taxes in Australia annually over three years, Oxfam has claimed in a new report.
The charity released a global report, Prescription for Poverty, on Tuesday that examined the tax practices of four of the world’s largest pharmaceutical companies: Johnson & Johnson, Pfizer, Merck Sharp & Dohme (MSD Australia), and Abbott.
It said the companies in question “systematically stash their profits in overseas tax havens”. The companies are understood to reject Oxfam’s claims.
In addition to the claim that the companies have avoided paying $215m each year between 2013 and 2015 in Australia, Oxfam said they “may be unfairly avoiding more than $146m every year in developing countries”. The $215m figure is four times the tax Oxfam said the companies actually paid over that period – $63m.
The report noted it is referring to “law practices which unfairly reduce tax”.
“Oxfam objects to these practices but does not claim they are unlawful or liable to penalties.”
Across nine countries – Australia, Denmark, France, Germany, Italy, New Zealand, Spain, the United Kingdom and the United States – the report found an estimated $4.8bn in tax revenue was lost each year as a result of tax avoidance from the four pharmaceutical companies.
In Australia, Pfizer was accused of avoiding the most tax at $94m a year, followed by Johnson & Johnson ($92m), MSD Australia ($22m) and Abbott ($7m). That equated to “almost the full cost of Medicare’s urgent after-hours home visits service in 2015–2016”.
A Johnson & Johnson spokesman said the company complied with tax requirements in every jurisdiction it operated in, noting it paid 23% tax for the 2015-16 financial year.
“The Oxfam report released today is inaccurate and misleading and ignores fact-based information provided by Johnson & Johnson directly,” the spokesman said.
A Pfizer spokesman said the company “abides by all accounting and tax laws wherever we do business and pays all taxes due”.
A spokesman for MSD Australia said: “MSD Australia strictly adheres to all taxation laws and regulations in this country. Merck globally also complies with all tax rules on a worldwide basis.”
An Abbott spokeswoman said the company was a “responsible and transparent tax payer, paying all of its taxes owed in every country in which it operates around the world”.
The companies recorded a combined 7% loss over 2013–15 in Australia, while making a 31% profit in low-tax jurisdictions over the same period, the report said.
“We are not accusing these pharmaceutical firms or their Australian subsidiaries of doing anything illegal,” Oxfam said.
“However, Oxfam’s report again suggests that these pharmaceutical companies are structuring their operations as such to shift profits to tax havens. They are also not transparent about it, with little data available for their operations in tax havens.”
The charity’s report is an attempt to pressure governments to support global efforts to tackle tax avoidance, including implementing country-by-country financial reporting, while also shaming corporations into becoming more transparent about their tax operations.
“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,” said Oxfam Australia’s chief executive, Helen Szoke.
