Wednesday, July 01, 2015

Herr Schulze invoked at Corporate tax inquiry

7 TV cameras for a tax inquiry. Never would have imagined that #backintheday

Nine of the biggest drug companies in the world had $8 billion in Australian revenue but paid just $85 million in tax last year, an inquiry has heard.
During a public hearing in Sydney on (Wednesday), members of a senate economics committee accused global pharmaceutical companies of shifting profits generated in Australia to low-tax jurisdictions offshore - the same charge levelled at technology companies.
Pharmaceutical companies pay just $85 million tax on $8 billion revenue 

Pharmaceutical companies insist they pay the right amount of tax but have provided few details of the dollars involved ahead of a public hearing on tax avoidance on Wednesday 
Representatives of nine companies, including household names Pfizer and GlaxoSmithKline, will appear before a senate economics committee in Sydney. Pfizer Australia says it has an effective tax rate on underlying profit that is "consistently above Australia's corporate tax rate of 30 per cent". "Pfizer Australia's practices have been subject to rigorous review and have not resulted in any disputes with the [Australian Tax Office] or adjustments to the tax filings," managing director David Gallagher said in a written submission to the committee ahead of his appearance on Wednesday. ​

Senator Sam Dastyari at a press conference after the inquiry.
Senator Sam Dastyari at a press conference after the inquiry. 

New Paul Nolette book on state attorneys general Federalism On Trial includes history of suits led by New York’s Eliot Spitzer to redefine as “fraud” widely known drug-pricing practices that Congress had declined to ban or otherwise address. The resulting lucrative settlements also earmarked money to fund private critics of the pharmaceutical industry;

Tax needs an overhaul

 The Australian taxation system is not designed to simply and fairly tax multinational corporations ("Big pharma defend their tax payments ahead of hearing", AFR, June 30). Tax Commissioner Chris Jordan concludes "Transfer pricing is ultimately trying to shift profit out of Australia either in the pricing of the products or the size of the royalty regarding the intellectual property". Related party loans and interest rates create similar problems. Arguments, objections and appeals over individual tax cases continue for years – all unproductive, uncertain, expensive, time consuming, frustrating and not necessarily creating precedents.
If the Tax Commissioner is to do his job competently and with a high degree of certainty then the tax system needs an overhaul so that multinational corporations are taxed in an efficient and equitable manner. Applying easily determined benchmark turnover taxes to the Australian generated revenues of multinational corporations is the only sensible option.
Graeme Troy AFR letters