Big Pharma's tax planning has raised more than a few eyebrows lately, with the U.S. government and foreign lawmakers grilling multinational companies over questionable tactics. Now, the Australian government is cracking down on top drugmakers, comparing their big state-funded revenues to their meager tax payments.
As The Sydney Morning Herald reports, the country's 5 biggest suppliers of publicly subsidized drugs including Pfizer ($PFE), Sanofi-Aventis ($SNY), AstraZeneca ($AZN) and Johnson & Johnson ($JNJ) brought in sales of nearly $5 billion last year but only paid $10 million in taxes each, on average. None too pleased with the numbers, Australia's Senate committee is planning public hearings July 1 to probe drugmakers and industry reps over alleged tax avoidance.
The hearings plan comes a few weeks after the Australian government started to put the heat on drugmakers, scrutinizing tax-management tactics such as transfer pricing--where a company charges itself higher prices on imported products to reduce taxes--and booking royalties in lower tax areas. Pfizer, the number one supplier to the country's Pharmaceutical Benefits Scheme (PBS), paid less than $2 million last year even though it brought in nearly $2 billion in local revenues, including nearly $600 million from the PBS, the Morning Herald says.
And J&J, which admitted in its Australian financial accounts that it makes "only those disclosures necessary," paid $20.7 million in tax on declared profits of $69 million and sales of $1.47 billion, according to research obtained by the committee seen by the Herald.
The Australian government has already gone after tech companies such as Google ($GOOG) and Apple ($AAPL) for tax avoidance. But the latest figures for pharma companies present "more evidence why a crackdown on multinationals and the tax they pay must go beyond tech companies," Mark Zirnsak, spokesman for Australian advocacy group Tax Justice Network, told the newspaper. "They need to be asked to explain these numbers."
Meanwhile, drugmakers continue to deal with pushback in the U.S. over tax-paying strategies. Companies such as Mylan ($MYL), Hospira ($HSP) and AbbVie ($ABBV) launched inversion deals last year, planning to shift their domiciles abroad to avoid domestic taxes. But Hospira and AbbVie pumped the brakes on the proposed acquisitions after the U.S. government laid out more restrictive tax guidelines discouraging companies from moving abroad.
- read the Sydney Morning Herald story
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