SYDNEY: The world’s top pharmaceutical companies on Wednesday told an Australian parliamentary hearing they were compliant with local and international laws, despite claims they are charging higher prices to minimize tax.
Australia and other nations have been increasing their efforts to crackdown on profit-shifting by multinational firms that use complex structures to lower their tax bills in some jurisdictions.
The structures include “transfer pricing” where goods and services are sold within different entities in an international company.
Firms allegedly use high transfer prices, close to retail prices, in higher-tax jurisdictions to minimize the amount of profit generated. The lower profit reduces the amount of tax paid.
Hearing chair Senator Sam Dastyari said the nine firms fronting the committee collectively made Aus$8.0 billion ($6.1 billion) annual revenue in Australia.
They also received more than Aus$3.5 billion from taxpayer-subsidies through the government’s Pharmaceutical Benefits Scheme, which helps lower the cost of medicines for Australians, but only paid tax of $85 million collectively last year.
Senior executives from the local subsidiaries of the firms—including Pfizer,
AstraZeneca, GlaxoSmithKline and Johnson & Johnson—told the hearing in Sydney they were meeting their tax obligations and transfer-pricing agreements under domestic and international regulations.
But they could not say how much other countries were being charged for their drugs compared to Australia when questioned.
“You couldn’t even tell us whether we are being ripped off, because you don’t know what everyone else is paying for them,” the hearing’s chair Senator Sam Dastyari said.
GlaxoSmithKline’s Australian general manager and vice-president Geoffrey McDonald said “Australians are paying very fair prices”, but added, “I don’t know” when questioned about how he could claim this without having knowledge of other prices.
The other drug companies fronting the hearing were Sanofi, Merck, Sharp and Dohme (MSD), Roche, Novartis and Eli Lilly.