The Fresenius case: Health company avoids taxes just like Amazon and Google

When it comes to tax avoidance, the German DAX 30 company Fresenius is just as aggressive as the often-criticised US tech giants Apple, Amazon and Facebook. In the past ten years, Fresenius has avoided paying up to €2.9 billion in taxes worldwide through aggressive tax planning, and €8 billion of the group’s untaxed profits are held in offshore accounts. These findings are the result of a study carried out by the Centre for International Corporate Tax Accountability & Research (CICTAR) in cooperation with the European and global federations of public service unions (EPSU & PSI) and the Tax Justice Network.

Fresenius is represented in almost every well-known tax haven around the world, including the Cayman Islands, the British Virgin Islands, Hong Kong, Delaware, Singapore and Panama. The company uses this network of tax havens to shift profits and avoid higher corporate taxes in Germany and other countries. Intra-group debt is a key tool for tax avoidance: In 2017, the two Irish Fresenius subsidiaries made a profit of €47 million, despite having no employees, just by granting loans to group companies in Spain and the United States.

The CICTAR report makes it clear that profit shifting and transfer pricing are practices common to many multinational companies, including large German multinationals. Fresenius avoids its tax liability by reporting high profits where corporate taxes are low. In important markets such as Germany and the United States, profits are artificially reduced. Although Fresenius generates its sales primarily in countries with a corporate tax rate of at least 30 percent, the company's global tax rate in 2018, according the company’s own filings, was only 18.2 percent.

As a result of aggressive tax planning, society is being denied funds for much needed investment, not least in the health sector. Notably, Germany is among the countries which suffer the most. According to research carried out by Gabriel Zucman, Professor of Economics at the University of Berkeley and member of the Independent Commission on the Reform of International Corporate Taxation (ICRICT), Germany may lose more than any other EU country to European tax havens from transfer pricing.

Jan Willem Goudriaan, EPSU General Secretary calls on the Croatian Presidency and the European Council to take decisive action to close tax loopholes and accept public country-by-country reporting. “Since the Luxleaks scandal we have seen how many companies are dodging their due contribution. The Fresenius model presented today shows yet another company avoiding paying taxes. It appears as if the company obtained favourable tax rulings. We demand further investigation.”

It does not come as a surprise that Fresenius is engaged in aggressive tax avoidance given the company’s violation of workers’ rights outside of Germany and global patterns of corruption. The problem is that they have been able to get away with it. Governments must not continue to fund or support tax dodging, corrupt companies. It is imperative that tax loopholes are shut down and that the antiquated global tax system is changed so that essential public services, such as health care, can be adequately funded. Germany should support the EU proposal on public country-by-country reporting and push for a real reform of international corporate taxation rather than lowering its own corporate tax rates and equating national interest with the interests of big businesses.

Through aggressive tax planning, Fresenius is further jeopardising its reputation as a trustworthy health care company. Critics demand that the health care company correct its course and set a good example: "A company that is committed to the well-being of people and that generates its sales largely through government health care budgets should pay its taxes responsibly and transparently," says Christoph Trautvetter, a tax expert from the Tax Justice Network. A first step would be for Fresenius to dissolve its subsidiaries in tax havens and implement the new Global Reporting Initiative (GRI) standards for reporting on tax transparency.

The study can be found at: http://cictar.org/fresenius/