Press Release; 29 January 2015
BAYER appearing poor to tax authorities
Appropriate Taxes for Multinationals!
The chemical and pharmaceutical company BAYER has systematically moved profits to low-tax countries. The corporation thereby reduces its tax burden at the expense of taxpayers in Germany, the United States or France.
BAYER has 15 subsidiaries in the Netherlands alone. This, however, has little to do with patriotic feelings of the CEO, Marijn Dekkers. The reason is that Holland aggressively advertises its offers for saving business taxes. The use of intellectual property and trademark rights in so-called “patent boxes”, for example, is taxed at only five per cent. Thus the BAYER subsidiaries in Germany or the UK can claim the fees for something such as an Aspirin licence as a reason for tax reduction, while the fees hardly matter in terms of earnings in the Netherlands. The country is also suitable for an intercompany bank that lends money for investments to the divisions. The interest on the credits reduces taxes in Germany, but it hardly lowers the profits in Mijdrecht at BAYER WORLD INVESTMENTS B.V.
In 2012 BAYER therefore transferred shares worth 1.4 billion euros from the United States to BAYER WORLD INVESTMENTS in Holland. The subsidiary BAYER GLOBAL INVESTMENTS received 526 million euros from French divisions. Additionally, the BAYER CAPITAL CORPORATION granted loans of 1.3 billion euros in the Netherlands.
BAYER uses Belgium for tax evasion purposes, too, because the country allows interest on equity. In 2011 the company doubled the funds of its subsidiary in Antwerp, raising them to eight billion euros, and could transfer its profit of 254.8 million euros almost completely to Germany. It only had to leave 10.8 million euros, which is equivalent to a tax quota of 4.3 per cent. In Luxemburg BAYER profits from concessions for insurances; both its INDURISK RUECKVERSICHERUNG AG and its PANDIAS RE AG are located there.
The trick is to make profits where they won’t lead to any costs, and to make losses where there is the threat of tax authorities. BAYER´s Chief Strategy and Portfolio Officer Werner Baumann calls this tactic “a changed regional distribution of results”. Baumann is the head of the Global Tax Projects department. The employees in this department work, amongst other things, on “Tax Planning” and “Transfer Pricing”, that is, calculating the price for intercompany deals of trade mark rights, licences and actual products.
Tax dumping is very harmful for society. This can be seen in the German city of Leverkusen, where BAYER’s headquarters are situated. Even though BAYER is the most valuable German company, Leverkusen has been financially suffering for two decades. During several years the municipality was forced to introduce emergency budgets because BAYER paid hardly any taxes – in some years, such as 1999, 2001, 2003 and 2004, none at all.
The latest catastrophic news for Leverkusen came in May 2014 and was connected to BAYER's takeover of MERCK´s division for over-the-counter products. Announcing the deal, the company declared: “BAYER expects significant tax savings from the first year after completion onwards.” In Leverkusen alone there will be eight-figure losses in tax revenue. This year the municipality will receive only 60 million euros of trade tax from all companies. It should be mentioned for purposes of comparison that BAYER alone paid twice that amount in 1990.
The German corporate tax reform of 2001 already played a significant role in reducing the taxes paid by German corporations. From that time onwards, BAYER paid no trade tax or corporate income tax at all for years. Between 1997 and 2000, the company was paying about 1 billion a year in corporation tax. However, in 2009 tax payments dropped to 511 million and to 411 million in 2010. The “golden law” that made this possible was drafted by Heribert Zitzelsberger, former head of BAYER´s tax department, whom the company dispatched to the German Finance Ministry.
The Coalition against BAYER Dangers demands an end to the destructive tax race. Jan Pehrke from the Coalition’s board says: “The fact that BAYER hardly contributes to community financing is unacceptable. The company is steadily abdicating its responsibility towards the general public at the expense of taxpayers, who have to pay the bill through rising taxes and levies. It is high time to ensure that large companies take an appropriate share of the tax burden!“ The Coalition has been monitoring BAYER since 1978.