Mylan shells out $32.5m to cover tax inversion fines
pharmafile | December 11, 2014 | News story | Sales and Marketing | AbbVie, Abbott, Mylan, SEC, bresch, coury
Mylan will pay five of its top executives an early $32.5 million to cover penalties from the company’s plans to move overseas, as it presses ahead with a deal with Abbott.
In a so-called ‘tax inversion’, US-based Mylan is looking to purchase assets from Abbot’s European generics business for $5.3 million – and move its legal address to the Netherlands in the process.
This will lower its tax rate from around 25% down into the ‘high teens’, according to the company’s Securities and Exchange Commission (SEC) filing.
Under a 2004 US law, senior executives from companies in such deals must pay a special exercise tax of 15% of their restricted stock or unexercised options – rules that are designed to discourage companies from exiting the country.
In its filing, Mylan said that the penalties would deprive the executives of “a substantial portion of the value of the equity-based awards that they hold, when they were critically important to Mylan’s past success and in negotiating this transformative opportunity for Mylan, and will continue to be critically important to its successful implementation and execution, and our future strategy and performance”.
Leaders including chief executive Heather Bresch and chairman Robert Coury, will therefore get equity vested ahead of schedule as well as having their tax bills paid for by the company.
Mylan has apparently not been discouraged by recent US law changes further decreasing the benefits of tax inversions. President Barack Obama has pledged to curb the increasing number of ‘corporate deserters’ who have ‘renounced their US citizenship’ by moving their business overseas.
“We don’t want companies who have up until now been playing by the rules suddenly looking over their shoulder and saying […] ‘some of our competitors are gaming the system. We need to do it too’,” the president said in August.
These new rules have already led to AbbVie quickly backing out of its plans to buy Ireland-based Shire, with the US firm saying that they ‘reinterpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions’.
George Underwood
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