close
Thursday March 28, 2024

Global pharma companies dodging millions of dollar taxes in Pakistan: Oxfam

By Fakhar Durrani
September 20, 2018

ISLAMABAD: While the rising cost of medicines has made healthcare treatment practically unaffordable for most low income households, the world’s biggest pharmaceutical companies have enriched themselves by avoiding millions of dollars of taxes every year in Pakistan and other developing countries, the UK-based charity Oxfam International (Oxford Committee for Famine Relief) reported.

A new Oxfam report, ‘Prescription for Poverty,’ has analysed the financial disclosures between 2013 and 2015 of the top four multinational pharmaceutical companies. It found that these companies appeared to avoid an estimated $112 million in taxes every year in seven developing countries: Chile, Colombia, Ecuador, India, Pakistan, Peru and Thailand.

One multinational company alone allegedly avoided $1.7 million of taxes in Pakistan, Oxfam alleged. It did not have access to data for the three other pharmaceutical giants. Almost a million children die of pneumonia every year - an estimated 91,000 of them in Pakistan. With the missing tax money, the seven developing countries studied by Oxfam could buy pneumonia vaccines for 8.9 million children, Oxfam said.

If their governments invested the dodged tax revenue in healthcare, it could pay for 10 million girls to be vaccinated against pneumonia, Oxfam said. The disease can cause cervical cancer, which is responsible for the death of one woman around the world every two minutes. Nearly 90 percent of these fatalities are women in developing countries, the report said.

Oxfam alleged that two pharmaceutical companies account for nearly all the $4.7 million that would be due to Ecuador, while a company owed Pakistan about $1.7 million.

The report said tax dodging was fueling the inequality crisis, by widening the gap between rich and poor. When drug companies dodge 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, provide care to loved ones when healthcare systems fail, and foot the bill for regressive taxes, it said.

“No one should watch their children suffer without healthcare or be forced to choose between buying food or the medicines they need to stay alive. Yet this is happening every day and the way drug companies do business is contributing to this tragedy," said Winnie Byanyima, the Executive Director of Oxfam International.

"Drug companies appear to be cheating governments out of tax revenues that could be invested in healthcare. They are pricing medicines out of the reach of poor people. And they are using their power and influence to torpedo any attempt to cut the cost of drugs and police their tax practices,” she said.

Oxfam’s analysis suggests these four companies are shifting profits out of countries where they do their business and into tax havens that charge little or no tax. The companies are secretive about their finances but the available data reveals 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. Such practices, while not necessarily illegal, are not in line with the spirit of the law, it said.

‘Prescription for Poverty’ also outlines how the companies undermine poor people’s health by overpricing medicines, thus putting them out of reach for cash strapped public health services and poor patients. The report also details how the pharmaceutical industry uses its economic and political clout to shape government policy on tax, trade and health in its interest - particularly in the US, where the industry spends over $200 million every year on lobbyists and political donations.

While tax avoidance figures appear lower in developing countries, the impact can be more severe because poorer countries often have weaker public services and 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 $100 billion a year.

These drug companies present themselves as bastions of social responsibility, but their business practices tell a different story. Four companies must pay their taxes; make their medicines affordable; and stop rigging government rules in ways that undermine the fight against poverty and inequality, Byanyima said.

"Governments must also insist that companies publish financial information for every country where they do business, so it is clear if they are paying their fair share of tax,” she said.