There is a certain irony for drug group Perrigo that a move designed for its perceived tax advantage could end up undermining the finances of the company.
Ireland's corporation tax rate was one of the main attractions for what was then a relatively low-profile pharma group specialising in over-the-counter therapies when it acquired what was left of the State's one-time most successful drug company Elan. It was one a spate of tax-driven transactions at the time, mostly by US companies, known as corporate inversion.
For Perrigo, the Republic’s relatively low 12.5 per cent corporate tax rate compared to the US equivalent was augmented by the trading losses built up over a number of years by Elan in its business as a drug development group.
That meant that even with a $3.25 billion transaction like Elan’s sale of the rights to the multiple sclerosis drug Tysabri that it had developed, the company would not have to pay any tax at all.
The new assessment – for €1.636 billion with, potentially, interest and penalties to follow – would be a material blow for a company that, as of last night, had a market capitalisation of just $5.2 billion.
Perrigo is not the only company under pressure from the Revenue. Earlier this month, tech company Analog Devices was told that its Irish subsidiary owes about €43 million relating to intercompany transfers stretching back to 2013.
Perrigo noted that Revenue had moved just two months ahead of “the expiry of the applicable five-year statutory limitation period” for review of its 2013 tax bill.
Certainly, Revenue seems to be taking a more activist approach to the tax affairs on multinational operations in the State. There is, however, a suspicion that it might have moved now to establish the claim even if it is not yet clear itself how watertight the case is.
Fianna Fáil finance spokesman Michael McGrath noted Friday that the disputed Perrigo tax assessment brings to over €3 billion the amount of tax that is now subject to appeal.
Speaking on RTÉ, he said there were currently 340 appeals outstanding, some of which have been in the system for more than 10 years. It appears it will be sometime before the exchequer sees the money, if ever.
