AstraZeneca pays $1.1bn to resolve tax affairs
pharmafile | March 31, 2011 | News story | Sales and Marketing | AstraZeneca, tax
AstraZeneca has sorted out a decade-long dispute over its tax affairs by agreeing to pay out $1.1 billion this year.
The issue has been swathed in red tape, but the US and UK governments this week agreed terms on transfer pricing arrangements for AstraZeneca’s US business for the years 2002-2014.
Transfer pricing essentially relates to the way that multinationals pay for goods and services between different companies within their own group. “In this case we have sought to ensure that we don’t pay taxes for the same things in both countries,” explained an AstraZeneca spokesman.
At the same time, the manufacturer has reached an accord with US tax authorities on a related issue arising from the company’s global merger in 1999, dating back to the integration of its US businesses as long ago as 2000.
The issues binding these complex negotiations have taken years to unpick: the $1.1 billion net figure is to settle all US transfer pricing and related valuation matters from 2000 to the end of last year.
The money covers the US tax it anticipates having to pay, as well as updated estimates of corresponding tax refunds in other countries.
Asked why things had taken so long, the spokesman said: “I think that is a question for the government bodies. We sought their assistance in 2004 and now they are finished.”
AstraZeneca had already made a $2.3 billion provision in its accounts for the payments, and says it will now release around $500 million of the remaining $1.2 billion, giving a boost to earnings in the first quarter of 2011.
The group’s effective tax rate for this year is now expected to be approximately six percentage points lower than the previous guidance of 27%, at around 21%.
On the back of that, AstraZeneca has increased its 2011 target for core earnings per share from $6.45-$6.75 to $6.90-$7.20 per share.
Adam Hill
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