The global pharmaceuticals industry sucks billions from our pockets every year by selling the medicines that keep us alive. But come tax day, much of that wealth quickly “vanishes” into regulatory loopholes that let companies inject cash into hidden, untaxable offshore accounts. According to an in-depth investigation by Oxfam, the global tax-dodging machinery allows multinationals to withhold huge potential tax payments and, in turn, deny critical funding for governments, often at the expense of the same health-care systems with which they do business.
A forensic accounting of available financial data of the pharmaceutical giants Johnson & Johnson, Pfizer, Merck Sharp & Dohme, and Abbott—shows that from 2013 to 2015, these four multinational drug makers collectively avoided paying about $3.7 billion to the governments of Australia, Denmark, France, Germany, Italy, New Zealand, Spain, the United Kingdom, and the United States (underpaying by about $2.3 billion in the US alone).
Multinational corporations often counter that they are operating within the law, and simply doing no more than what local tax codes require. That is technically true, but don’t tax authorities see how corporate tax dodgers are effectively flouting financial oversight and draining their countries’ social budgets? Actually, the global corporate shell game is the byproduct of rigged corporate-tax laws that allow companies to minimize their tax burdens in high-tax countries. Using the limited data available, researchers calculated “average pre-tax profit margins of just six percent in countries with standard tax rates, compared to 31 percent in the tax havens of the Netherlands, Belgium, Ireland and Singapore.”
Had the missing tax dollars in the United States actually been paid to the government, Oxfam says, millions of lives might be saved. Even in a country as rich as the United States, “If these four companies paid their fair share, governments would have the revenue to vaccinate 10 million girls against Human Papilloma Virus (HPV), the virus that causes cervical cancer, and provide more than a million kids in America with health insurance.”
The system stretches well beyond richer nations where these companies are based. In many poorer countries—where access to basic medicine is most critical—tax dodging appears to be draining the public coffers of seven developing countries—Thailand, India, Ecuador, Colombia, Pakistan, Peru, and Chile—by collectively escaping $112 million in taxes. That’s $112 million in missed potential revenue that might otherwise go to fund child-vaccination programs, or insulin and HIV/AIDS treatments for the poor.
In India, where a fragile health system struggles to provide basic care for millions, the government has bled an estimated $74 million in tax revenues out of public coffers and into the four companies’ hidden offshore accounts. Oxfam stresses the human costs facing victims of Japanese encephalitis, a mosquito-borne virus that kills many children living in poor sanitary conditions: The lost potential tax payments from the four companies “would be more than enough to buy Japanese encephalitis vaccines and bed-nets for every child born in the whole of India in one year.” But instead, drug makers suck maximum profits from the impoverished patients whose lives depend on their medicines.
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Beyond their taxploitation, drug makers are notorious for massively overpricing their products—major cancer drugs, for example, might be marked up at 100 times the cost of making each pill. But Oxfam’s analysis reveals how the companies not only exploit patients with extortionate medical costs, but also capture even more of our money through under-regulated fiscal systems. By shielding profits from the tax structures that sustain social services, Big Pharma effectively erodes the health-care institutions that care for their customers.
But as multinationals game global tax regimes, do governments of tax havens get anything in return for enabling the industry to capitalize on their lax regulations? Despite Big Pharma’s massive capital, it’s unclear how much of that translates into real local investment for the countries they trade in. Robert Silverman, Oxfam America’s private-sector advocacy manager, points out that in some tax haven countries, profiteering companies “do have some real operations that do employ real people—like Ireland and Belgium—but without greater transparency it is impossible to judge whether the amount of profits companies report in those countries are commensurate with real economic activity.”
While drug makers’ finances remain murky, there is one clear way to tackle the political core of the epidemic of tax dodging—by demanding transparency from companies so there can be a complete reckoning of their financial, and ethical, obligations to the countries where they draw their profit streams. Oxfam calls on governments to establish internationally coordinated regulations that “Mandate…public country-by-country financial reporting for all large multinational corporations,” to closely regulate and force companies to pay a fair share in taxes on all profits. And most importantly to design regulatory efforts with the aim of ensuring equitable access to medicine for all.
Yet the global regulatory enforcement system has for years failed to police the flow of global capital networks. If anything, by promoting “free trade” deals that deregulate local financial systems and facilitate the massive trade networks that fuel global commerce, governments have helped corporations game the tax system. In fact Peru, Colombia, and other US “trade partners” in the Global South have brokered neoliberal free-trade deals with the United States that only encourage more”liberalization” of financial systems.
The Trump administration has claimed his latest tax-code revisions would help return corporate tax revenue to the United States. But the recently passed tax “reforms” seem to reward drug multinationals with tremendous tax cuts. According to Silverman, on top of lower tax burdens, Congress has “richly rewarded these companies by allowing them to repatriate these profits at a greatly reduced rate—15.5 percent—saving them an estimated $50 billion: $25.5 billion from Pfizer, $13 billion from Merck, and $9 billion from Johnson & Johnson, plus an additional loss of $4 billion every year.”
So instead of holding drug companies accountable, it actually rewards their financial exploitation with generous tax amnesty. Silverman argues “tax reform did not reduce the incentive for US companies to continue to offshore profits.” So far, tax repatriations have been paltry. And what little revenue has been “reshored” to the United States isn’t being reinvested in US communities and workforces; instead it’s just getting pumped around internally into shareholder dividends and stock buybacks. Meanwhile American taxpayers face eye-popping medical bills, stagnant wages, and anemic health-care programs. What if the money the drug companies are hoarding was actually used to fund our health-care system?