Oxfam has called for swifter action against tax avoidance by multinationals after its research showed pharmaceutical firms used Irish tax law to reduce the amount of corporation tax they paid — to zero in one case.
The aid agency says while there is nothing illegal about the companies’ management of their tax affairs, they are being allowed to “profit shift” to avoid high rates of corporation tax which in turn deprives countries where profits are generated of badly needed revenue.
In a report, Prescription for Poverty, to be published today, Oxfam looks at the tax practices of four of the world’s largest pharmaceutical companies, Abbott, Johnson & Johnson, Merck and Pfizer, all four of which have operations in Ireland.
The report shows Abbott paid no tax on profits of €1.2bn declared in Ireland in 2015, either through the infamous “double Irish” arrangement or other legitimate but criticised write-offs. If those profits had been subject to corporation tax at the 12.5% rate, they would have been worth €155m to the exchequer.
Johnson & Johnson, meanwhile, declared profits of €4.31bn here in 2015 but paid €250m, which works out at a tax rate of 6%.
Oxfam Ireland chief executive Jim Clarken said some of the profits tracked should have been more justly declared in developing countries where the firms had subsidiaries.
Mr Clarken called on the Government to push for mandatory country-by-country reporting by all multinationals so that it was clear where they were making profits and where they were paying taxes. He said the Oxfam research could only “scratch the surface”.
The report says Abbott had a 75% profit ratio in Ireland in 2013-15 but only 8% and 4% profits in Thailand and Chile where corporation tax rates are 20% and 21% respectively, and a 36% loss in India where the tax rate is 34%. Johnson & Johnson declared a 38% profit ratio in Ireland and 8% in Thailand.
“Increased transparency would give decision-makers, investors, journalists and civil society actors, especially in developing countries, the data to help review and, if necessary, reform corporate tax avoidance practices,” Mr Clarken said.
A Department of Finance spokesperson said the department did not comment on the tax affairs of individual taxpayers but said the 2015 data used by Oxfam pre-dated the OECD agreement on base erosion and profit shifting (BEPS).
BEPS aims to clean up the way multinationals conduct their tax affairs.
The department’s Corporation Tax Roadmap, published this month, outlined “significant actions Ireland has taken and will take over the coming years on international tax reform”, the spokesperson added. Mr Clarken said the roadmap did not go far enough.