The Future is Equal

Drug companies cheating New Zealand out of millions in tax revenue

The world’s biggest pharmaceutical companies who are behind some of New Zealand’s most trusted brands – including Neutrogena, BAND-AID, Johnson’s Baby and ChapStick – appear to be unfairly avoiding an estimated NZ$21million in tax per year in New Zealand, reveals new research from Oxfam today.  

The research analyses the financial disclosures from Pfizer, Merck & Co. (also known as MSD), Johnson & Johnson and Abbott, between 2013 and 2015 and suggests these four companies are shifting profits out of New Zealand and into tax havens that charge little or no tax.

Pfizer, Merck & Co., Johnson & Johnson, and Abbot are among the world’s biggest pharmaceutical companies with global revenues topping NZ$2.7 trillion in the 10 years from 2006 to 2015.

Despite these bumper profits, the companies still appear to be cheating New Zealand out of millions of dollars that could be spent on our hospitals and schools. $21 million could employ 400 newly graduated and much needed nurses.

Rachael Le Mesurier, Oxfam New Zealand’s Executive Director, said:

“When big drug companies unfairly avoid tax, our government is cheated out of the resources it needs to invest in hospitals, schools, and medicines. The result? Less nurses and doctors and bigger waiting times when we are sick. Bigger classes and less time for teachers to ensure our kids are getting the best education.”

Later today, a global report will be released detailing how the companies have avoided billions of dollars of tax in 16 countries around the world, including 7 developing countries.

Says Le Mesurier: “These drug companies present themselves as highly committed to social responsibility, but their business practices tell a different story. Pfizer, Merck & Co., Johnson & Johnson and Abbot must show they are paying their fair share of taxes; make their medicines affordable particularly for developing countries; and stop finding ways to unfairly avoid their tax responsibilities which undermine the government resources needed to fight against poverty and inequality.

“Somebody always pays the price for a companies’ unscrupulous behaviour, and it’s not the company. It’s us – average Kiwis. And it hurts the poorest women and children in the poorest parts of the world even more,” said Le Mesurier.

Tax avoidance is fuelling the inequality crisis, widening the gap between rich and poor. When drug companies unfairly avoid tax, it is the poorest in society who suffer the most as governments seek to balance their budgets by cutting essential services and raising other forms of tax.

Often it is poor women who rely more heavily on public healthcare services, spend their lives providing care for loved ones when healthcare systems fail, and foot the bill for tax losses. They are robbed of the chance to improve their lives and lift themselves and their children out of poverty.

Equally, while unfair tax avoidance figures appear lower in developing countries, the impact can be more severe because poorer countries often have weaker public services, have a higher poverty rate, and rely more heavily on corporate taxes to fund public services. The UN estimates that corporate tax avoidance costs poor countries NZ$154 billion a year.

“The New Zealand government has made important steps over the past few years that go some way to stopping the revenue loss from multinational corporations’ unfair tax avoidance. But we must do more.

“Oxfam is calling on the New Zealand Government to require multinational corporations to publish key financial information about their operations 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,” said Le Mesurier.


Notes to editors:

The global report will be released at 11am NZ time on the 18th September. In all cases, when we use the name ‘Merck & Co.’, we are referring to the USA-based pharmaceutical company Merck and Company Inc., sometimes known as Merck Sharp & Dohme (MSD) outside of the USA, not the German-based pharmaceutical company Merck KGaA.