3rd November 2017
There have been multiple cases of global firms being caught using tax avoidance schemes in recent months and years, with a large number making the most of complex cross-border processes to reduce tax payments. While many news reports have focused on the like of American brands such as Apple and Google leveraging Europe-based tax-havens, European businesses are also guilty of using avoidance systems. Indeed, according to a recent report in Australia, French drug firm, Sanofi, has long been involved in tax avoidance in the Commonwealth.
Large-scale tax avoidance
Following investigations into the financial statements of Sanofi-Aventis Australia Pty Ltd over the last nine years, it has been revealed that the company has paid just 1.4% tax on revenues of $7.5 billion. This large-scale tax avoidance scheme was allegedly being used despite the firm receiving billions in subsidies from Australia’s Pharmaceutical Benefits Scheme (PBS).
The investigation revealed that Sanofi used a complex multi-layered avoidance strategy in order to reduce its payments in Australia. This included, but certainly wasn’t limited to:
- Utilising marketing expenses: making claims on marketing activity which some commentators have suggested was unnecessary for its globally renowned drug
- Debt-loading: borrowing large amounts from another Sanofi firm overseas, subsequently ensuring that some pre-tax profits were exempt from charges
- Making the most of marketing hubs: moving its products from Germany to France then Singapore and finally Australia rather than direct to the Commonwealth in a bid to reduce taxable profits
- Using political bribes: making a number of donations to the Liberal, Labour and National Parties to keep them on side with the firm
- Leveraging corporate welfare: claiming subsidies from the PBS while also offsetting costs through R&D claims.
Don’t be fooled
While Sanofi has arguably managed to get away with this large-scale tax avoidance scheme so far, the fact that investigations were launched in the first place suggests its time is coming to an end. No official investigations or charges have yet been discussed, however authorities in the country have invested in means of reducing avoidance schemes such as this.
Calls for amendments to multinational tax laws have been made and the Australian Tax Avoidance Task Force – which consists of 1,000 specialist officers – has been working hard to unearth fraudulent activity and recover costs.
It’s important that recruitment firms don’t get lulled into a false sense of security and use tax avoidance schemes as a means of making more money. Authorities across the globe are setting their sights on such activity and no one, regardless of size or power, is safe.
In an increasingly complex global tax arena, partnering with a specialist to ensure you remain compliant and avoid possible penalties or prison time is a priority.