IRD fisks nonsense from Oxfam

Stuff reports:

Inland Revenue has slammed a claim by that pharmaceutical companies are “cheating New Zealand” out of about $21 million of tax a year.

Oxfam based its estimate on an assumption that drug companies’ profit margins on their New Zealand revenues would match their global profit margins.

But Inland Revenue international revenue strategy manager John Nash said the methodology Oxfam used in its report “in our view, completely misrepresents the situation in New Zealand”.

“Taking a global profitability figure and applying it across the board does not and cannot illustrate what is happening in this country,” Nash said.

Yep it is arrant nonsense. With drug companies they lose $3 billion on producing the first pill and then make say $5 per pill thereafter. Different countries pay for research & development, marketing, production, distribution so there is no way you can compare any one country to the global profitability.

The main driver of profitability in the pharmaceutical industry was the creation and development of intellectual property but that did not generally happen in New Zealand, Nash said.

“It is important to examine what actually happens in a jurisdiction and how value is added before arriving at a conclusion that insufficient taxation has been paid by a multinational.

Exactly. But when do facts stop Oxfam. I miss the days they actually did useful stuff helping starving kids. Now they’re just a left wing lobby group.

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