Drug giants in NZ dodge $21m in tax, Oxfam claims
Charity group Oxfam has accused multi-national drug companies of dodging $21 million in tax through the under-reporting of their earnings in New Zealand.
Oxfam said its analysis of the financial disclosures from four global drug companies between 2013 and 2015 suggested they were shifting profits abroad, into tax havens that charged little or no tax.
In developed and developing countries alike, it said the profit margin tended to be lower than the global average, while in tax havens it was higher than that average.
“Whilst our estimates are based on an imperfect method holding the profit margin consistent across all countries, this approach is the most reasonable given the lack of publicly available data from all four companies,” Oxfam said.
Its analysis did not prove the companies were engaged in profit-shifting that crossed the line of what was allowed under existing rules, it said. Only tax authorities with access to full returns could decide if issues arose.
“But while the information available publicly is far from complete, the pattern is consistent: subsidiaries located in tax havens are on average significantly more profitable than those located elsewhere,” it said.
In New Zealand, Oxfam was able to obtain data for the four pharmaceutical corporations’ subsidiaries operating here. In New Zealand, the companies collectively had 10 subsidiaries, which together brought in revenues of an average $519m a year between 2013 and 2015, and posted profits of about $30m a year. These companies’ average profit margin in New Zealand was 6 per cent. In total, each year the four companies paid an estimated average $8m in taxes.
“Meanwhile, our method estimates an annual tax underpayment of approximately $21m for the four companies,” it said.
Rachael Le Mesurier, Oxfam NZ’s executive director, said the Government needed to require multinational corporations to publish key financial information in every country “so it’s clear if they are paying their fair share of tax and so that countries can hold them to account”.
The four are among the biggest pharmaceutical companies, with global revenues topping $2.7 trillion in the years from 2006 to 2015.
England-based Oxfam is expected to release a wider report today on tax avoidance in 16 countries.
The New Zealand Government had taken steps in recent years that went some way to stopping the revenue loss from multinational corporations’ tax moves but Le Mesurier said it must do more. No response to the claims was forthcoming from the companies when contacted by the Herald.
Oxfam estimated the tax losses to New Zealand based on the difference between tax paid and the hypothetical tax due on profits in line with the global average profit margin.