Glaxo to Contest $5.2Bn US Tax Bill ; Inland Revenue Talks with American IRS Break Down after UK Authority Backs European Drugs Maker
Reece, Damian, The Independent (London, England)
GLAXOSMITHKLINE, Europe's biggest drugs company, was hit with a $5.2bn (pounds 2.9bn) tax bill yesterday from authorities in the United States in a dramatic transatlantic tax row that has dragged in the Inland Revenue, which is backing Glaxo over the dispute.
After receiving the claim on Tuesday, Glaxo immediately went on the offensive yesterday, announcing that it planned to take the American Internal Revenue Service (IRS) to court to contest the tax claim.
The UK's Inland Revenue was brought in by Glaxo late last year to help resolve the dispute, which relates to the seven years between 1989-1996. However, talks between IRS officials and the Inland Revenue collapsed after UK officials sided with the Glaxo view that no additional taxes were payable, according to the company's version of events. Neither the IRS nor the Inland Revenue would comment on the dispute, citing confidentiality rules surrounding individual tax cases.
What amounts to one of the biggest Anglo-American tax rows in history is likely to escalate as a second argument is brewing over Glaxo's US tax payments covering 1997-2000. GSK said it was expecting to receive an additional bill for this period from the IRS, although it refused to say what it expected this claim to total.
The tax claim detailed yesterday is equal to 52 per cent of Glaxo's last declared pre-tax profits of pounds 5.5bn, after restructuring and merger costs.
The company, formed by the merger of Glaxo Wellcome and SmithKline Beecham three years ago, said it had made adequate provisions in the past for potential tax liabilities amounting to pounds 1.45bn. However, it refused to say what proportion of this was earmarked to pay claims from the US. It also said the trial resulting from its decision to file a petition in the US tax court was not expected until sometime in 2005-2006. …