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Perrigo settles with Revenue as 80% of tax bill written off 

An Irish-registered pharmaceutical company, Perrigo, has settled its €1.6 billion tax bill with the Irish Revenue Commissioners for €297 million. The settlement is also exempt from interest or penalty charges. 

Although 70% of Perrigo’s net sales are from the U.S. healthcare  system, the company is legally headquartered in Ireland for tax purposes.

The firm was hit with the revised tax assessment by the Revenue in 2018 over alleged underpayment of tax involving a transaction with rival big pharma company Biogen.

The revised assessment, which saw their bill slashed dramatically, related to Perrigo’s tax treatment of income earned by the sale of its intellectual property rights on Tysabri, a drug which is used to treat multiple sclerosis and Crohn’s disease.

Revenue classified this sale as a capital transaction as opposed to a trading transaction, thus making it subject to an effective tax rate of 33% rather than the standard 12.5% corporation tax rate.

Perrigo tried and failed to overturn the revised tax bill in the Irish High Court in November 2020. However, the company said it ha an outstanding appeal before the Tax Appeal Commission.

Now, the pharmaceutical giant has welcomed the settlement and has agreed to pay over the money within 7 days of the formal agreement being signed.

Perrigo chief executive Murray Kessler said on Wednesday that the almost €300 million tax settlement was in the best interest of all of Perrigo’s stakeholders, removing a “major uncertainty” for the business.

“We believe settling this tax dispute with Irish Revenue is in the best interest of all of Perrigo’s stakeholders as it removes a major uncertainty that has been a significant distraction to the company over the last three years,” Kessler said.

“The settlement provides that no interest is due and no penalties apply,” according to the statement. Perrigo said it has received written confirmation from the Revenue that it accepts the terms and expects to enact a formal settlement agreement in the coming days.

In a statement released on Wednesday night Perrigo said, “While the Company believes that its tax position was correct and would ultimately have been confirmed by the Tax Appeals Commission, given the risks inherent in any litigation, as well as the ongoing costs of what could have been years of litigation and the uncertainty that would create, the company and Irish Revenue have agreed to settle this matter.”

“With what was once a multibillion dollar uncertainty behind us, Perrigo can focus all of our efforts on delivering on our consumer self-care vision and long-term value,” Mr Kessler said.

Online, many were quick to criticise the decision. Some described it as “a joke”, insisting that the settlement was hugely unfair and that the unpaid € 1.3 billion should have been used for pressing issues like housing, hospitals or addressing the homelessness crisis.

Several people said that the decision represented “Big pharma [being] let off again. “If that was me or you that owed money to the tax man we’d be made to pay back with interest,” one user wrote.

“So Revenue settled for just 18.75% of the bill – now there’s a benchmark for the next time you have a tax bill,” another user wrote in reply to the news, while another said that the settlement showed that “tax is for little people”.

“Would the ordinary Joe Soap get away with paying only a fraction of what they owed?? Of course not. Once again the government prove their ineptitude by not standing up to big businesses and forcing them to pay what they owe. One rule for businesses, another rule for ordinary citizens,” one commenter vented.

However, those defending Perrigo said that they has been reassured by a govermment representative that their operations had been perfectly legal and above board, but that Revenue had subsequently decided to change the basis of assessment.

Following the settlement of the dispute, Perrigo shares soared on Thursday, according to reports.

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