Pfizer Canada Inc. (PFE-N) is urging the Liberal government to cut or freeze corporate taxes and approve targeted tax breaks in the 2021 federal budget, while also criticizing Canada’s efforts to reduce tax avoidance by global multinationals.
The policy recommendations are outlined in a prebudget submission sent to the Commons Finance committee by Pfizer Canada, the domestic arm of the global pharmaceutical company that received the first Health Canada approval for a COVID-19 vaccine.
The company is in talks with the federal government over the supply of its vaccine.
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In its prebudget submission, Pfizer notes that tax policies affect how multinational pharmaceutical companies decide where to locate production and research facilities and the associated high-paying jobs.
It asks the government to “maintain or reduce corporate income tax rates,” and enhance a tax credit for scientific research and development.
The company also said Canada is too aggressive in its scrutiny of transfer pricing, a practice in which multinational companies account for cross-border business activity within the parent company. This method can sometimes be used as a way to avoid taxes by shifting profits onto the books of subsidiaries in low-tax jurisdictions.
The practice is legal, but Canada and other members of the Organization for Economic Co-operation and Development (OECD) are discussing measures to ensure it is not used improperly.
“To retain and grow biopharmaceutical manufacturing and R&D activities in Canada, the tax regime must provide certainty and predictability in order to be effective as incentive for investments,” the company states. “Unfortunately, over the last decade, Canada has been viewed as a jurisdiction in which transfer pricing is systematically and aggressively challenged by the Canada Revenue Agency.”
The OECD has been negotiating for years on a new approach to taxing multinational corporations, particularly in the digital industry, and Finance Minister Chrystia Freeland announced in her fall update that Canada is prepared to act alone by Jan. 1, 2022, if no international deal is reached.
“The OECD’s current proposals regarding the taxation of the digital economy will almost assuredly, if they were to apply to the biopharmaceutical sector, introduce additional uncertainty for [multinational enterprises] and discourage them from maintaining or growing their activities in a country like Canada,” Pfizer Canada’s letter said.
The Finance committee will examine the seven-page document and nearly 800 other submissions as it produces recommendations for the 2021 budget. The letter was submitted in August, and posted online by the committee in late November.
Pfizer Canada director of corporate affairs Christina Antoniou said in an e-mail on Tuesday that the company’s budget recommendations do not come up during vaccine talks with federal officials.
“In fact, beyond the submission we provided, we have not had an opportunity to discuss our recommendations with the members of the Finance committee or anyone else,” she said.
Pfizer did not submit a prebudget report in recent years, Ms. Antoniou said, but “we felt it would be relevant” for 2021 to respond to the committee’s call for policy suggestions on restarting the economy after the pandemic.
Economist Toby Sanger, executive director of the advocacy group Canadians for Tax Fairness, said the timing of the company’s requests is a concern.
“Their recommendations are pretty aggressive and they’re frankly a bit disturbing considering the context that we’re in,” he said. “What’s disturbing is that they’re pushing for these recommendations at a time when they basically hold the cure [to COVID-19].”
Mr. Sanger took issue with Pfizer’s criticism of the CRA’s tax enforcement efforts with multinationals.
“Is this a veiled way to say back off on this?” he asked. “It’s not a gun to the head, but it’s a needle to the arms.”
Pfizer Canada also asked for a repeal or postponement of the planned 2024 phase-out of the Accelerated Investment Incentive for capital cost allowance rules, and a “reconsideration” of planned changes to the Patented Medicine Prices Review Board.
Ottawa recently decided to delay the changes to drug-pricing regulations by half a year. They were set to come into force in December and would adjust which countries the board uses to set a benchmark on drug prices and take into account a drug’s cost-effectiveness.
When asked on Friday whether the price-review board changes came up in their discussions with drug makers, Health Minister Patty Hajdu and Procurement Minister Anita Anand said no.
Opposition parties are now calling for the company and federal ministers to appear before the Commons health committee to explain the delay in the drug pricing changes.
Katherine Cuplinskas, a spokesperson for Ms. Freeland, said the government welcomes the work of the Finance committee and that the government will conduct its own prebudget consultations.
“We are committed to ensuring that everyone pays their fair share of tax,” she said in an e-mail.
Pfizer’s tax recommendations are contrary to those of the NDP, on which the minority Liberals often rely for support. With massive deficits looming because of the pandemic, the NDP is urging the government to consider tax increases for corporations.
NDP health critic Don Davies said the government needs to be far more transparent about what ministers agree to in their private meetings with vaccine manufacturers. He notes that Ottawa won’t release its contracts with vaccine manufacturers or say how much it is paying for vaccines.
“What I’m feeling is there is big lobbying going on behind closed doors by powerful, entrenched interests and almost a complete lack of transparency,” he said.
With a report from Kristy Kirkup
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