Recently, Merck's Chief Executive Officer Richard Clark told the Wall Street Journal that the company was "very conservative" in its tax practices. He also claimed that he was not concerned with the company's potential liabilities, given Merck's financial results, stressing: "I don't lose any sleep over that."
Today, Merck said it faces as much as $5.6 billion in tax liabilities from the U.S. and Canada stemming from four "disputes."
And of course this once powerful and respected drug giant wrote in a regulatory filing that it disagrees with the proposed "adjustments." In fact, a Merck spokesman said that the company believed the disputed transactions are in "full compliance with IRS rules" and that it plans to contest the matter.
In one dispute with the Canada Revenue Agency, Merck has been asked to pay an addition $1.8 billion (U.S.) in taxes and interest, related to certain intercompany pricing matters.
What is that, you may wonder?
Oh, it is the beautiful world of a global business. You see, if a company doesn't want to pay tax in a particular market, like Canada, they simply charge their affiliate in Canada transfer prices for the drugs they sell that are so high that most of the local profits conveniently "disappear."
And then this profit instead lands in corporate tax havens like Ireland. Which is one reason so many pharma companies are building factories on the Green Island.
But apparently, finally, the Canadians got fed up. I just wonder how long it will take for the rest of the world to wake up.
1 comment:
Well those countries that profit from this state of affairs are not going to wake up, nor are they going to wake up anyone else. Why kill the golden calf? It would be a good idea for the IRS in the U.S. to see how much this country bleeds from these practices, not only the tax issues, but associated issues, such as exported manufacturing and jobs, and other, associated taxes, now not being paid here. But this is not a new thing. Off-shore and other gimmicks have been going on for decades. Then there are the currency deals, international arbitrage, secret bank accounts. Today that is even more difficult to trace than it was in the past. Balances are blips on computer screens, and disappear fast. It is not only that international conglomerates make untraceable amounts of money on which no, or too little tax is being paid. There are additional losses we do not speak about, such as the double whammy of persons out of work, not paying taxes and instead taking from the system through transfer payments, in addition to other tax revenue losses. But money has a way of being able to grow in markets where it is present, at an accelerated rate, because deposits can be used to create accounts, and credits, on which even more money is earned.
Similarly, I bring this up again and again, the fact of illegals getting free medical care through Medicaid, which comes out of Medicare, while American citizens do not get that advantage while they are the ones paying for it, is not confined to the money they actually pay in, or the money that goes out of Medicare. It is larger than that, because Americans lose jobs, illegals and the companies that hire them do not pay taxes, wealthy nations, like Mexico, export their poor, and have a relative advantage. And they too, with the additional revenues - no transferpayments to their poor, a.o., and money being sent back in by those same poor - accumulate wealth with which they can do all sorts of banking operations. Banking operations are like "selling stuff", except that they are selling money, which makes them more money. We need regulations, in business, in healthcare, and International Treaties which stand for something and can be enforced. We already have them with some countries on Social Security. There is no reasoned rationality that the U.S. taxpayer pays for other nations' healthcare obligations while the same taxpayer can not get it himself. Not only that, the reduced reimbursements to physicians (37% over nine years, 5% in January 2007), will make medical care unavailable to Medicare patients, who are still paying monthly medicare premiums out of their Social Security check, after having paid Medicare taxes all their working lives. Doctors are dropping whole Medicare practices already, and it will get worse after January 2007. Doctors can not afford to keep these Medicare patients. Especially not with the additional burdens of Medical Malpractice awards which are out of sight, and only help trial lawyers. People who really need that, can not afford the trial lawyer, and even if they could, they might get only a small percentage. Most often they have to pay, and the trial lawyer will not win the case. It is all stupid, leakage, economically, more like bleeding to death, of resources. It stumps growth.
The IRS and international bankers should also realize that balances, even if kept for a short period, before transferral to a final account, can earn arbitrage profits at many sites during the process, and those profits may be untraceable. These profits, illegal as they are, can be used for all sorts of other illegal transactions and purposes, even to fund international terrorism or crime, such as drug deals.
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