Perrigo makes offer to Revenue on disputed €1.64bn tax bill

Perrigo has made an offer to settle a disputed €1.64 billion tax bill levied by Revenue related to its purchase in 2013 of Elan Pharmaceuticals.

Murray Kessler, chief executive of the consumer healthcare business, revealed the company had been in talks with Revenue for several months on the issue after it lost a High Court challenge to quash the tax bill late last year.

He did not give any details of the scale of the offer but said the issue might be resolved “in the coming year”.

The disputed tax bill is the second-largest in the history of the State behind only the high-profile Apple case which was ruled upon by the European Commission.

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In a conference call to discuss the first-quarter results of the Irish-headquartered but US-based Perrigo, Mr Kessler told analysts that the company was “in discussions with Irish Revenue about a potential settlement of the €1.6 billion-plus tax assessment”.

“Discussions have been largely of a technical nature and grounded in law and have taken place over the past few months,” he said, adding: “There has been sufficient progress in these discussions for Perrigo to submit a board-approved offer to settle the matter.

“From our perspective, a reasonable resolution grounded in law is preferable to what could be years and years of litigation, but if resolution is not reached, be clear, Perrigo still maintains that its original tax filings were correct and is prepared to vigorously defend its position.

“But the two parties have started talking and I believe we are on a path toward a resolution in a shareholder-friendly manner.”

Elan IP sale

A US-based tax expert, Bob Willens, said ahead of the High Curt ruling that that the company might be able to eventually settle for just 10-15 per cent of the €1.64 billion bill – or a figure of €160 million-€240 million.

The tax bill served on Perrigo relates to the sale by Elan of its intellectual property interests in multiple sclerosis drug Tysabri in 2013 to Biogen for an upfront payment of $3.25 billion and a share of future royalties.

That sale took place months before Perrigo bought what was left of Elan by way of a corporate inversion, a controversial practice where a foreign company reversed itself into Irish businesses to secure an Irish domicile and lower corporate tax rate.

The dispute centres on Revenue’s decision, following a 2016 audit, to characterise Elan’s sale as a capital transaction, eligible to be taxed at a rate of 33 per cent. The company maintains that the cash received was declared as trading income, taxable at 12.5 per cent.

Perrigo sought to quash the Revenue assessment by way of judicial review last year, arguing that it was being treated unfairly by Revenue, which was acting beyond its legitimate powers.

In those proceedings, Perrigo said Revenue’s treatment of Elan’s tax returns over many years meant it, Perrigo, had a “legitimate expectation” as a taxpayer it should be able to account for the Tysabri sale as trading income.

But the High Court ruled against the company, with Mr Justice Denis McDonald finding that Perrigo had failed to establish any basis to interfere with the assessment.

Perrigo has also appealed the assessment to the Tax Appeals Commission.

The disputed €1.64 billion accounts for more than 43 per cent of a total of €3.75 billion that was caught up in tax appeals as of last September, according to a report from the Comptroller and Auditor General.